Answer: A — RBI was established on 1 April 1935 under the Reserve Bank of India Act, 1934. It was nationalised on 1 January 1949. The bank was set up based on the Hilton Young Commission's recommendations (1926).

Answer: B — RBI's headquarters is in Mumbai (Fort area). It was originally in Kolkata (1935–1937) before shifting to Mumbai. New Delhi has an important sub-office but is not the headquarters.

Answer: C — RBI does NOT accept deposits from the general public — that function belongs to commercial banks. RBI's key roles include issuing currency (except Re 1 coins), acting as the government's banker, and regulating credit/monetary policy.

Answer: B — CRR (Cash Reserve Ratio) is the percentage of a bank's Net Demand and Time Liabilities (NDTL) that must be kept with the RBI in cash. It does NOT earn interest for banks. SLR = liquid assets in own vault; Repo = overnight lending rate.

Answer: A — SLR (Statutory Liquidity Ratio) is the percentage of NDTL banks must hold in their own vaults as cash, gold, or approved government securities. Unlike CRR, SLR earns interest through G-Sec holdings. Current SLR: 18% (check RBI site for latest).

Answer: B — Repo Rate (Repurchase Rate): RBI lends overnight funds to commercial banks against collateral (G-Secs). An increase in repo rate increases borrowing cost, reduces money supply, and controls inflation. Currently ~6.5% (verify latest).

Answer: B — MSF (Marginal Standing Facility) allows banks to borrow up to 1% of their NDTL overnight from the RBI at the MSF rate (typically Repo + 0.25%). Banks can pledge SLR securities below the mandatory limit. It serves as a safety valve for sudden liquidity shortages.

Answer: A — Reverse Repo Rate: Commercial banks park their surplus funds with the RBI at this rate. When RBI raises the reverse repo rate, banks park more funds with RBI, reducing money available for lending (reduces money supply).

Answer: B — The MPC has 6 members: 3 from the RBI (Governor as Chairperson, Deputy Governor in charge of monetary policy, one RBI official nominated by the Board) + 3 external members nominated by the Government. Decisions are by majority vote; the Governor has a casting vote in case of a tie.

Answer: C — To absorb excess liquidity, RBI uses the Reverse Repo facility (banks park funds with RBI) or the Standing Deposit Facility (SDF), introduced in April 2022 as the floor of the LAF corridor. Repo injects liquidity; CRR reduces credit creation; MSF provides emergency borrowing.

Answer: B — PCA (Prompt Corrective Action) is a supervisory framework applied to banks that breach certain risk thresholds (capital adequacy, NPA, return on assets). Restrictions include limits on dividends, branch expansion, and new business lines. The goal is to restore the bank's health before a crisis occurs.

Answer: A — NBFC = Non-Banking Financial Company — a company registered under the Companies Act that provides financial services (loans, investments, insurance) but does NOT hold a banking licence. NBFCs cannot accept demand deposits or issue cheques. Regulated by the RBI.

Answer: B — The Banking Regulation Act, 1949 governs the licensing, management, audit, and winding up of banking companies in India. The RBI Act, 1934 governs the RBI itself. FEMA governs foreign exchange; the Companies Act covers non-bank companies.

Answer: B — As Lender of Last Resort, the RBI provides emergency funds to banks facing a sudden liquidity crisis to prevent bank runs and systemic collapse. This protects financial stability. The function is available only to solvent (not insolvent) banks.

Answer: A — RBI is responsible for printing and issuing all currency notes (Rs 2 to Rs 2000). Exception: Re 1 note is issued by the Government of India (Ministry of Finance) and bears the Finance Secretary's signature. Coins (all denominations) are minted by Government Mints but issued via RBI.

Answer: C — The Banking Regulation Act was passed in 1949. The RBI Act was 1934. The Act governs all banking companies in India and empowers the RBI to regulate and supervise them.

Answer: B — Scheduled Banks are those listed in the Second Schedule of the RBI Act, 1934. They must have paid-up capital of at least Rs 5 lakh. Benefits include access to RBI facilities (repo, CRR concessions). All PSBs, major private banks, foreign banks, and most co-op banks are scheduled banks.

Answer: A — The Lead Bank Scheme (1969) assigns one commercial bank as the "lead bank" for each district. The lead bank coordinates banking services, surveys credit needs, and ensures banking penetration in that district. It arose from the F. K. F. Nariman Committee's recommendations.

Answer: C — Section 35 of the Banking Regulation Act, 1949 empowers the RBI to carry out inspection of any banking company to verify its financial condition and compliance. Section 35A gives RBI power to give directions; Section 21 relates to credit policies; Section 49A prohibits acceptance of deposits by non-banks.

Answer: C — The first batch of 14 major commercial banks was nationalised on 19 July 1969 under Prime Minister Indira Gandhi. A second batch of 6 more banks was nationalised in 1980. The objective was social banking — extending credit to agriculture, small industries, and the poor.

Answer: C — The merger of the five associate banks (SBH, SBM, SBBJ, SBP, SBT) and Bharatiya Mahila Bank into SBI was a Government of India decision that took effect on 1 April 2017. It made SBI one of the top 50 banks globally by assets.

Answer: B — Priority Sector Lending (PSL) target: 40% of ANBC for domestic commercial banks and foreign banks with 20+ branches. Sub-targets: Agriculture 18% (of which 8% to small/marginal farmers), Micro enterprises 7.5%, Weaker sections 12%. Foreign banks with <20 branches: 40% of ANBC but with different sub-targets.

Answer: A — RRBs (Regional Rural Banks) were established under the RRB Act, 1976. Ownership: Central Government 50%, State Government 15%, Sponsor Bank 35%. They serve rural credit needs at lower transaction costs. Currently ~43 RRBs operate after mergers.

Answer: A — KYC = Know Your Customer — a mandatory due diligence process that banks follow to verify the identity and address of customers, preventing money laundering, terrorist financing, and fraud. Key documents: Aadhaar, PAN, passport, voter ID.

Answer: B — ARCs (Asset Reconstruction Companies) buy Non-Performing Assets (NPAs/bad loans) from banks at a discount and attempt to recover them through restructuring, sale, or legal action. Governed by SARFAESI Act, 2002 and regulated by the RBI. Examples: ARCIL (first ARC in India), NARCL (National ARC Ltd).

Answer: A — NPA = Non-Performing Asset — a loan or advance where interest or principal payment is overdue for 90 days or more. NPAs are classified as Substandard, Doubtful, or Loss based on the duration of default. High NPA levels weaken a bank's capital base and profitability.

Answer: B — The SARFAESI Act (Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act), 2002 allows banks to enforce their security interest (e.g., mortgage, hypothecation) without filing a civil suit, making NPA recovery faster. Not applicable to loans below Rs 1 lakh or agricultural land.

Answer: C — Under Basel III, Indian banks must maintain a minimum CAR of 9% + 2.5% Capital Conservation Buffer = 11.5% total. CAR = (Tier 1 + Tier 2 Capital) / Risk-Weighted Assets. Tier 1 (going-concern capital) must be at least 7%; CET1 at least 5.5%.

Answer: B — FEMA (Foreign Exchange Management Act), 1999 replaced the draconian FERA (Foreign Exchange Regulation Act), 1973. FEMA is a civil law (not criminal), facilitates external trade and payments, and is administered by the Enforcement Directorate for violations.

Answer: A — IBC, 2016 provides a unified framework for resolving corporate insolvency within 180 days (extendable to 270 days). The NCLT handles corporate insolvency; DRT handles individual insolvency. The Insolvency and Bankruptcy Board of India (IBBI) is the regulator. A key tool for banks to recover large NPAs.

Answer: A — NABARD = National Bank for Agriculture and Rural Development. Established: 12 July 1982. HQ: Mumbai. It provides refinance credit to regional rural banks, cooperative banks, and commercial banks for agriculture and rural activities.

Answer: B — SIDBI (Small Industries Development Bank of India) was established in 1990 as the apex institution for promotion, financing, and development of Micro, Small and Medium Enterprises (MSMEs). HQ: Lucknow.

Answer: B — NHB (National Housing Bank, 1988) is the apex institution for housing finance. It regulates and supervises Housing Finance Companies (HFCs) like HDFC, LIC Housing Finance, etc. HQ: New Delhi. NHB also provides refinance to HFCs and banks for housing loans.

Answer: A — EXIM Bank (Export-Import Bank of India, 1982) provides financing, facilitation, and promotion services for India's foreign trade and investment. It finances exporters, overseas buyers of Indian goods, and outward investments. HQ: Mumbai.

Answer: A — MUDRA (Micro Units Development and Refinance Agency) Bank, launched in April 2015 under PMMY, offers: Shishu (≤Rs 50,000), Kishore (Rs 50,001–5 lakh), Tarun (Rs 5–10 lakh). For micro enterprises, street vendors, and small manufacturers. MUDRA does not directly lend — it refinances MFIs and banks.

Answer: A — SEBI = Securities and Exchange Board of India. Established: 1988 (statutory powers from 1992). HQ: Mumbai. It regulates the Indian capital market — stock exchanges, mutual funds, portfolio managers, brokers, and listed companies.

Answer: B — IRDAI (Insurance Regulatory and Development Authority of India, 1999) regulates and promotes the insurance sector in India (both life insurance and non-life/general insurance). HQ: Hyderabad. Ensures policyholder protection and insurance market development.

Answer: B — PFRDA (2013, statutory) regulates the National Pension System (NPS) — a voluntary, defined-contribution pension scheme for Central Government employees (mandatory from 2004), state government employees, and the general public. HQ: New Delhi.

Answer: B — The Kisan Credit Card (KCC, launched 1998–99) is issued by commercial banks, cooperative banks, and RRBs to provide farmers with flexible, revolving credit for agricultural inputs. NABARD designed the scheme and provides refinance to lending institutions. It simplifies farm credit into a single-window facility.

Answer: A — NABARD's headquarters is in Mumbai. (Note: NABARD was originally established in Pune but its current HQ is in Mumbai.) SIDBI is in Lucknow; PFRDA in New Delhi; IRDAI in Hyderabad.

Answer: A — The Bank Rate is the rate at which the RBI rediscounts bills of exchange or extends long-term loans to banks WITHOUT collateral. It is a signalling rate — changes affect the overall cost of funds. Currently aligned with MSF rate. Unlike Repo (overnight, with collateral), Bank Rate is for longer-term funding.

Answer: A — The LAF (Liquidity Adjustment Facility) allows RBI to manage day-to-day liquidity in the banking system using Repo operations (inject liquidity) and Standing Deposit Facility/Reverse Repo (absorb liquidity). The corridor between SDF rate and MSF rate defines the LAF band. Introduced in 2000.

Answer: A — Urban Co-operative Banks (UCBs) are regulated by the RBI. State Co-operative Banks and District Central Co-operative Banks are supervised by NABARD, though licensed by RBI. State registrars of cooperative societies also have concurrent regulatory authority.

Answer: A — India adopted Flexible Inflation Targeting (FIT) in 2016 under RBI Act amendments. The RBI's primary mandate is to maintain CPI inflation at 4% ± 2% (2% to 6%) over the medium term. The MPC sets the repo rate to achieve this target.

Answer: A — SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a global messaging network used by banks to securely send and receive transaction instructions (wire transfers, trade finance, securities). It does NOT move money itself — it only sends instructions. HQ: Brussels, Belgium.

Answer: A — RTGS = Real Time Gross Settlement — a continuous, real-time interbank payment system operated by RBI for high-value transactions (minimum Rs 2 lakh). Each transaction is settled individually (gross) without netting. Available 24×7 since December 2020.

Answer: A — NEFT = National Electronic Funds Transfer — an electronic payment system for transferring funds between bank accounts in India. No minimum/maximum limit. Settled in hourly batches (now 48 half-hourly batches, 24×7). Operated by RBI.

Answer: B — UPI is operated by NPCI (National Payments Corporation of India), the umbrella organisation for retail payment systems in India. NPCI was incorporated in 2008 as an initiative of the RBI and the Indian Banks' Association. NPCI also operates RuPay, NACH, IMPS, FastTag, etc.

Answer: A — IMPS (Immediate Payment Service) enables instant interbank electronic fund transfer 24×7, 365 days via mobile, internet, and ATM. Launched by NPCI in 2010. Transfer limit: Rs 5 lakh per transaction. Unlike RTGS/NEFT (delayed), IMPS provides instant credit.

Answer: A — Basel III (introduced 2010, after the 2008 crisis) sets minimum capital adequacy (8% total CAR), Liquidity Coverage Ratio (LCR, 100%), Net Stable Funding Ratio (NSFR), and leverage ratio. Developed by the Basel Committee on Banking Supervision (BCBS) at the Bank for International Settlements (BIS), Basel, Switzerland.

Answer: A — A Fixed Deposit (FD) or Term Deposit is a savings instrument where a lump sum is deposited for a fixed tenure (7 days to 10 years) at a predetermined interest rate higher than savings accounts. Premature withdrawal attracts a penalty. Senior citizens typically get 0.25–0.5% extra.

Answer: B — A Recurring Deposit (RD) requires fixed monthly deposits for a predetermined tenure (6 months to 10 years). The interest rate is similar to an FD. RD is ideal for salaried individuals to build savings through disciplined monthly contributions.

Answer: B — DICGC (a subsidiary of RBI) provides deposit insurance of up to Rs 5 lakh per depositor per bank (enhanced from Rs 1 lakh in February 2020). This covers savings, fixed, current, and recurring deposits. If a bank fails, DICGC pays insured amounts within 90 days.

Answer: B — NACH (National Automated Clearing House), operated by NPCI, handles high-volume, low-value, repetitive transactions: salary credits, pension disbursements, dividend/interest payments, utility bill payments, and EMI auto-debits. It replaces the older ECS (Electronic Clearing Service).

Answer: B — LIBOR was the global benchmark for inter-bank borrowing rates, used in trillions of dollars of financial contracts. It was phased out in June 2023 after the 2012 LIBOR scandal (rate manipulation). SOFR (Secured Overnight Financing Rate), based on actual overnight Treasury repo transactions, replaced LIBOR as the primary US dollar benchmark.

Answer: A — Financial Inclusion aims to deliver banking, credit, insurance, and payment services to unbanked and underbanked populations at affordable costs. Key initiatives: Jan Dhan Yojana (PMJDY), Business Correspondents, Aadhaar-linked accounts, MUDRA, and Payments Banks.

Answer: A — PMJDY (Pradhan Mantri Jan Dhan Yojana) was launched on 28 August 2014. It aims to ensure universal access to banking facilities including a basic savings account, remittance services, credit, insurance (Rs 2 lakh accident cover), and pension. As of 2024, over 53 crore accounts have been opened.

Answer: A — Small Finance Banks (SFBs) are licensed by RBI to provide savings, deposits, and credit mainly to small businesses, farmers, and low-income households. Minimum capital: Rs 200 crore. They must extend 75% of their credit to priority sector; 50% of loans must be below Rs 25 lakh. Examples: Au Small Finance Bank, Equitas SFB.

Answer: B — MCLR (effective April 2016) replaced the Base Rate system. It is the minimum interest rate below which banks cannot lend, calculated using marginal cost of funds, operating costs, and negative carry. MCLR is more sensitive to repo rate changes than the older Base Rate system. New loans are now increasingly linked to External Benchmark Lending Rate (EBLR).

Answer: A — EBLR (mandatory from October 2019) requires banks to link all new floating-rate retail and MSME loans to an external benchmark: RBI Repo Rate, 91-day T-Bill, 182-day T-Bill, or any FBIL benchmark. This ensures faster monetary policy transmission — when RBI cuts the repo, home loan and MSME rates drop automatically.