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Banking Awareness Study Material – New Banking System

April 5, 2018 by Anthony Leave a Comment

Banking Awareness Study Material – New Banking System

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Over the years, banks in India have taken a new turn to avail their services to its customers in more easy and friendly manner. RBI is the sole organisation for providing a platform to fulfill the services offered by various bank. The Government’s objective of achieving 100% financial inclusion in India got a shot in the arm with the new banking system.

Indradhanush Scheme for Public Sector Banks

Union Government has launched a seven pronged plan called Indradhanush Mission to revamp functioning of Public Sector Banks (PSBs). Mission Indradhanush is aimed to revamp the functioning of public sector banks so that PSBs can compete with the Private Sector Banks. The mission is a brainchild of PJ Nayak committee. The mission includes the seven key reforms of appointments, board of bureau, capitalisation, de-stressing, empowerment, framework of accountability and governance reforms.

Appointments: Government had already announced that the post of Chairman and Managing Director in Public Sector Banks are to be split into (a) MD and CEO; and (b) Non-Executive Chairman. Under the new process of selection for MD and CEO, even private sector candidates are also allowed to apply for the position of MD and CEO.
Banks Board Bureau: BBB is a body of eminent professionals and officials, which replaced the Appointments Board for appointment of Whole-time Directors as well as Non-Executive Chairman of PSBs.
Capitalisation: Government of India has made an exercise to estimate the capital requirements (₹ 70000 cr) based on credit growth rate of 12% for the current year and 12 to 15% for the next three years depending on the size of the bank and their growth ability.
De-Stressing PSBs: The government will concentrate on de-stressing the hank’s bad loans.
Empowerment It provides greater flexibility in hiring the manpower to banks.
Framework of Accountability: The government announced a new framework of key performance indicators for state-run lenders to boost efficiency in functioning while assuring them of independence in decision making on purely commercial considerations.
Governance Reforms: Specific decision will be taken on optimising capital, digitizing process, strengthening, risk management, improving managerial performance and financial inclusion.

Banks Board Bureau
Banks Board Bureau (BBB) is an autonomous body of Union Government of India, with a view to improve Governance of Public Sector Banks (PSBs). The BBB started the function from 1st April, 2016. The Bureau will recommend for selection of heads-Public Sector Banks and Financial Institutions and help Banks in developing strategies and capital raising plans. Former Comptroller and Auditor General (CAG) Vinod Rai has been appointed as the first Chairman of Banks Board Bureau (BBB). It is a part of a seven-pronged revamp plan for PSBs dubbed as Indradhanush (rainbow) plan.

Composition of BBB
BBB comprises of a Chairman and six more members with at least 3 former bankers, 2 professionals and secretary, department of financial services representing government.

Major Functions of BBB

Give recommendations for appointment of full-time Directors as well as Non-Executive Chairman of PSBs.
Give advice to PSBs in developing differentiated strategies for raising funds through innovative financial methods and instruments and to deal with issues of stressed assets.
Guide banks on mergers and consolidations.

New Banks Format

Payments Bank
Reserve Bank of India (RBI) released guidelines for Licensing of Payments Banks on 27th Nov, 2014. These guidelines will allow mobile firms and supermarket chains, among others, to enter the banking arena to cater to individuals and small businesses. The objectives of payments banks is to push financial inclusion by providing small savings accounts and payments or remittance services to migrant labour workforce, low income households, small businesses, other unorganised sector entities and other users.

Guidelines of RBI for Payments bank
According to guidelines

The payments banks will be able to take deposits and remittances, internet banking and other specified services but cannot undertake lending services. ‘
Their holding are restricted to a maximum balance of ? llakh per individual customer.
They can issue ATM/debit cards but not credit cards and can also Issue other prepaid payment instruments.
Payment bank cannot undertake lending activities but can distribute the non-risk sharing simple financial products such as mutual fund units and insurance products, etc.
Non-resident Indians will not be allowed to open accounts in payment banks.
It is mandatory for payment banks to hold minimum capital of ₹ 100 crore. FDI of 74% is allowed in payment banks.
They can enable transfers and remittances through a mobile phone.
They can offer services such as automatic payments of bills, and purchases in cashless, chequeless transactions through a phone.

Licence Holding Companies
In August 2015, RBI gave nod to 11 entities to start Payment Bank. These are

Aditya Birla Nuvo Ltd.
Airtel M Commerce Services Ltd.
Cholamandalam Distribution Services Ltd.
Department of Posts.
Fino PayTech Ltd.
National Securities Depository Ltd.
Reliance Industries Ltd.
Dilip Shantilal Shanghvi (Sun Pharmaceuticals)
Vijay Shekhar Sharma (Paytm)
Tech Mahindra Ltd, and
Vodafone m-pesa Ltd.
In September 2015, Vijay Shekhar Sharma, Paytm founder announced to open country’s first Payment Bank.

India’s First Payment’s Bank
Airtel Payments Bank Limited launched India’s first live payments. Bank in Rajisthan on 23rd November, 2016. Customers in towns and villages across Rajasthan will be able to open bank accounts saving. Airtel retail outlets. The customers will also be able to avail extra benefits. Like money transfer to any bank account in India and personal accidental insurance of ₹1 Lakh with every saving account

Small Finance Banks
RBI had released the guidelines on Small Finance Banks along with the Payment Banks on 27th Nov, The objective of small finance banks is to further financial inclusion by providing

Basic banking facilities to the unbanked and thereby boosting saving habits.
Supply of credit to small business units, small and marginal farmers, micro and small industries and other unorganised sector entities, through high technology-low cost operations

Conditions for Setting up Small Bank

Minimum paid-up equity capital requirement of ₹ 100 crore.
Every small finance bank must have the words “small finance bank” in its name.
They cannot setup subsidiaries to undertake non-banking financial service activities.
75% of its Adjusted Net Bank Credit (ANBC) should be advanced to the priority sector as categorised by RBI.
Maximum loan size to a single person cannot exceed 10% of total capital funds; cannot exceed 15% in the case of a group.
At least 50% of its loans should constitute loans and advances of up to ₹ 25 lakh.
Small banks can undertake financial services like distribution of mutual fund units, insurance products, pension products, and so on, but not without prior approval from the RBI.
A small bank can transform into a full-fledged bank, but only after RBI’s approval.
A fundamental requirement is that it must have 25% of its branches setup in unbanked areas.

Important Features of Small Banks

They can accept any deposit (savings, current, fixed deposits, recurring deposits) like commercial banks.
Unlike payment banks, small finance banks will be allowed to lend money also.
For the initial 3 yr, prior approval will be required for branch expansion.
To give the feel of local bank, their area of operation will be restricted.
NBFC’s, any individual with 10 yr of experience in banking can apply for licenses.
Their targets are small businesses and MSMEs.
They are not allowed to lend the deposited money to big businesses or industries.

Difference Between Payment Banks and Small Finance Banks

Difference	Small Bank	Payments Bank
Eligibility	Professionals with 10 yr in financial services or promoter group with 5 yr track record	Card Issuers, Finance Companies, Business, Correspondents, Telecom Companies, Retailers, etc.
Capital Requirement	₹ 100 crore Equity Capital	₹ 100 crore Equity Capital
Scope of Activity	Providing basic banking facilities to poor and small businessmen	Accept Deposits, Issue Debit Cards, Remittance services. Cannot issue credit carols.
Promoter Contribution	Promoter’s initial contribution should be 40% lowered to 26% in 12 yr.	Promoters should retain a 40% stake for first 5 yr.

Jalandhar (punjab)-headquartered ‘Capital Local Area Bank’ lanched the India’s first small finance bank. The small bank launched operations under a new name- Capital Small Finace Bank Limited on April 13, 2016.

India Post Payments Bank
The Union Cabinet has given its approval for setting up of the India Post Payments Bank (IPPB) as a Public Limited Company under the Department of Posts. It will have 100% Government of India (Gol) equity and shall be established with total expenditure of ₹ 800 crore. Now, the IPPB has to obtain banking licence from RBI by September, 2017.
The India Post Payments Bank Limited (IPPBL) has received the Certificate of Incorporation from the Registrar of Companies, Ministry of Corporate Affairs under the Companies Act, 2013. It will generate employment opportunities for about 3500 skilled banking professionals, will setup 650 branches and 5000 ATM across the country.

Important facts related to IPPB

IPPB will start operations in March, 2017 in about 50 districts and will cover the entire country by the end of FY 2018-19.
Its services will be linked to post offices and alternative channels riding on modern technology including ATMs, mobiles, simple digital payments and point of sale PoS/m-PoS devices etc.
It will also generate opportunities for propagating financial literacy across the country and help furthering the cause of financial inclusion.

Anywhere Banking
It is a highly secure and convenient system for online, real-time inter branch transactions across the bank. Anywhere banking (AWB) offers you greater flexibility, transaction power, convenience and ease in banking. It is considered as 24 x 7 services.

Features of Anywhere Banking

Withdraw or remit cash through AWB cheque from any branch of bank.
Transfer funds from one account to another in less than 10s to anywhere in India.
Cash withdrawal facility is extended to savings, current, loan and overdrafts Accounts.

National Payments Corporation of India (NPCI)
NPCI is the umbrella organisation for all retail payments system in India. It is being promoted by the Reserve Bank of India. It was founded in 2008 as a not for profit organisation registered under section 25 of the Companies Act, 2013. It has successfully played pioneering role in the development of a domestic card payment network called RuPay, reducing the dependency on international card schemes.
Services included in NPCI are

National Financial Switch (NFS)
Interbank Mobile Payment Service (IMPS)
Rupay Card
Cheque Truncation System (CTS)
Aadhaar Enabled Payment System (AEPS)
Unified Payments Interface (UPI)

MUDRA Bank (SIDBI) Ltd.
Micro Units Development and Refinance Agency Bank (MUDRA Bank), is a new institution setup by the Government of India for development of micro units and refinance of MFls to encourage entrepreneurship in India and provide the funding to the non-corporate small business sector. It was launched by Prime Minister Narendra Modi on 8th April, 2015. Mudra Bank has been setup with only one goal in mind – to fulfill all the Funding needs of Non-Corporate Small Business. Mudra Ltd. was setup as a corporate subsidiary of Small Industries Development Bank of India (SIDBI) in March, 2015 prior to the launch of the Pradhan Mantri Mudra Yojana (PMMY) in April, 2015.
The Union Cabinet has approved the conversion of Mudra Ltd. into Mudra (SIDBI) Bank as, a wholly owned subsidiary of SIDBI. Mudra Ltd. has been functional since 8th April, 2015.

MUDRA Scheme/Yojana
Under the guideline of Pradhan Mantri Mudra Scheme, MUDRA Bank has launched its three initiative product and its name is Shishu, Kishor and Tarun to signify the stage of growth and funding needs of the micro units or entrepreneur. Mudra Bank is refinancing through State level institutions. Mudra will deliver the loan through NBFCs, MFls, Rural Banks, District Banks, Nationalise Banks, Private Banks, Primary Lending Institutions and other intermediaries.
Categories are given below

Shishu Category All those businesses that have been just started and looking for loan will fall in this category. A loan cover of ₹ 50000 will be given to all micro units falling in this category.
Kishor Category This one is for those who have started their business but it has not been established yet. A loan cover from ₹ 50000 to ₹5 lakhs will be given to units falling into this category.
Tarun Category All small businesses which have been setup and established will fall into this category. There may be some financial requirements for the betterment of business. That’s why all small businesses or units falling into this category will be eligible for a loan cover of up to ₹ 10 lakh.

Tit-Bits

UPI provided a mobile personal identification number MP which will be a standardised 4 or 6 Gp digit number similar to ATM PIN.
Private Sector Banks with 3 yr of continuous profit track record and net NPA within 3% are I eligible under Pradhan Mantri Mudra Scheme.

New Banking Platform for Payment

Unified Payments Interface
UPI system has been developed for all retail payments in the country by National Payments Corporation of India (NPCI) to make the transfer of money easy and simple. It was launched on 11th April, 2016 in Mumbai. It is a system that powers multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, seamless fund routing and merchant payments into one hood. At the start, ten major banks—SBI, Canara Bank, BOI, ICICI Bank, HDFC Bank, Punjab National Bank, Bank of Baroda, FISBC, and Citi Bank integrated the interface with their mobile apps. 29 banks have agreed to join the platform. Some important features of UPI.

Features of UPI

Both the sender and the receiver should have enabled UPI platform for the transaction to take place.
All UPI enabled banks will allow their apps to be consolidated. So, one can perform all payment transactions.
The limit on transaction through UPI system is ₹ 1 lakh.
Charges can be applied depending on the amount of money transferred.
The Service is available 24 X 7.
No need to carry the debit or credit cards which also sometimes lead to security problems.
Merchant will not be able to track even the account number.
UPI system will not at all include the wallets.
The transaction will be shown as IMPS Bank transfer in the bank account statement.

National Unified NUUP Platform
National Unified USSD Platform (NUUP) is a Unstructured Supplementary Service Data (USSD) based mobile banking service from NPCI that brings together all the Banks and Telecom Service Providers. In NUUP, a customer can access banking service by just pressing *99# from his/her mobile phones. This service works across all GSM mobile handsets. According to the Reserve Bank of India (RBI), the USSD payment method can be used for sending money as low as ₹ 1, and as much as ₹ 5,000 per transaction.

Prepaid Payment Instruments
Prepaid payment instruments are payment instruments that facilitate purchase of goods and services, including funds transfer, against the value stored on such instruments. The value stored on such instruments represents the value paid for by the holders by cash, by debit to a bank account, or by credit card. The prepaid instruments can be issued as smart cards, magnetic stripe cards, internet accounts, internet wallets, mobile accounts, mobile wallets, paper vouchers and any such instrument which can be used to access the prepaid amount (collectively called Prepaid Payment Instruments hereafter). The prepaid payment instruments that can be issued in the country are classified under three categories viz

Closed system payment instruments
Semi-closed system payment instruments and
Open system payment instruments

Banks, NBFCs and other persons are permitted to issue prepaid gift instruments subject to the following conditions:

The maximum validity of the prepaid gift instruments shall be three years.
Maximum value of each such payment instrument shall not exceed ₹ 50000.
Cash withdrawal shall not be permitted for such instruments.
Full KYC of the purchasers of such instruments shall be maintained.
The issuer shall maintain the details of the persons to whom such instruments have been issued and made available on demand.
Entities may adopt a risk based approach, duly approved by their Board, in deciding the number of such instruments which can be issued to a customer, transaction limits, etc.

Core Banking System
Core banking is type of banking in which a person who opens a bank account in a branch of a bank, will become a customer not only of that branch, but he becomes a customer of all branches of bank and can conduct banking transactions anywhere and at anytime. Thus, he can deposit and withdraw cash from anywhere with the branches of same bank.
Core banking is a general term used to describe the services provided by a group of networked bank branches. Core banking is basically depositing and lending of money. Normal core banking functions will include deposit accounts, loans, mortgages and payments. Banks make these services available across multiple channels like ATMs, Internet banking, and branches.

Elements of Core Banking Include

Making and servicing loans.
Opening new accounts.
Processing cash deposits and withdrawals.
Processing payments and cheques.
Calculating interest.
Customer Relationship Management (CRM) activities.
Managing customer accounts.
Establishing criteria for minimum balances, interest rates, number of withdrawals allowed and so on.
Establishing interest rates.
Maintaining records for all the bank’s transactions.

National Automated Clearing House (NACH)
From 1st May, 2016 NACH replaced Electronic Clearing Service (ECS). The National Payments Corporation of India (NPCI) has implemented an electronic payment service termed as National Automated Clearing House (NACH) for banks, financial institutions, Corporates and Government Departments. NACH is a funds clearing platform similar to the existing ECS of RBI.

NACH has both Debit and Credit variants and it aims at facilitating interbank, high volume, debit/credit transactions, which are bulk and repetitive in nature. The primary motive of NACH is to handle low value, high volume transactions based on electronic files.
Ideally implementing this mandate will allow transactions to be cleared in real-time mode rather than batch mode.
The NACH platform will have national footprint which will cover 82000 + bank branches.

Question Bank

1. Banks Board Bureau (BBB) is an autonomous body of

Reserve Bank of India
Union Government of India
SEBI
SIDBI
None of the above

2. The first Chairman of Banks Board Bureau (BBB) was

Vinod Rai
Bimal Sharma
M O Rego
S K Verma
S R Rai

3. Interest Rate for Shishu Category is in the range of

8 to 10%
0 to 11%
10 to 12%
12 to 15 %
15 to 18 %

4. Government had already announced that the post of Chairman and Managing Director in Public Sector Banks were to be split into

MD and CEO
Non-Executive Chairman
Executive officer
1 and 2
All of the above

5. Union Government has launched a………… pronged plan called Indradhanush Mission to revamp functioning of public sector banks (PSBs).

6. The Indradhanush mission is aimed to revamp the functioning of

Public Sector Banks
NBFC
Private Sector Bank
RRB
RBI

7. Announcement for Bank Board Bureau (BBB) was made in Budget speech for the year

2013-14
2014-15
2015-16
2016-17
2017-18

8. After excluding the internal profit generation, extra capital facilities available under the Indradhanush Mission by the Gol will be upto which financial year?

2017
2018
2019
2020
2021

9. RBI has come out with a new category of borrower called

Non-Cooperative borrower
Cooperative borrower
All borrower
Commercial borrower
Non-Commercial borrower

10. The government is looking at introducing………….for the PSU bank managements.

Employee Stock Ownership fund
Employee Stock Ownership Plan
Employer Stock Ownership Plan
Employee Stock Management Plan
Employee Shift Ownership Plan

11. It provides greater flexibility in hiring the man power to banks

Empowerment
De-stressing PSBs
Capitalisation
BBB
Governance Reforms

12. Bad loans in Indradhanush mission is referred under

Bank Board Bureau
Capitalisation
De-stressing PSBs
Empowerment
Governance Reform

13. Major functions of BBB

Guide banks on mergers and consolidations
Guide banks on investment
Guide banks on HR solution
Guide banks on Scheme
Guide banks on banking regulation

14. BBB comprises of a Chairman and six more members with at least

1 former banker and 5 professionals
3 former bankers and 2 professionals
2 former bankers and 2 professionals
2 former bankers and 3 professionals
4 former bankers and 1 professional

15. Reserve Bank of India released guidelines for licensing of Payments Banks in

2007
2009
2011
2013
2014

16. The objectives of payments banks is to push financial inclusion by providing

small savings accounts and remittance services to migrant labour workforce
low income households
small businesses
unorganised sector entities
All of the above

17. Unified Payments Interface system will not at all include the

Debit Cards
Credit Cards
Wallets
24 x 7 Services
1, 2 and 4

18. It is mandatory for payment banks to hold minimum capital of

₹ 50 crore
₹ 100 crore
₹ 120 crore
₹ 150 crore
₹ 200 crore

19. FDI of…… is allowed in payment banks.

20. In August 2015, RBI gave nod to …. entities to start Payment Bank.

21. Some of conditions for setting up Small Bank is/are

Minimum paid up equity capital requirement of? 100 crore
Every small finance bank must have the words “small finance bank” in its name
They cannot setup subsidiaries to undertake non-banking financial service activities
1 and 3
All of the above

22. The Payments banks will be able to

take deposits and remittances
internet banking
lending services
1 and 2
All of the above

23. Target of Small Financial Bank are

small businesses and MSMEs
Non-schedule bank
Cooperative Bank
Builders
Manufacture sector

24. Who is eligible for Payment Bank?

Finance Companies
Business Correspondents
Telecom Companies
Retailers
All of the above

25. The EPPB has to obtain banking licence from RBI by September

2016
2017
2018
2019
2020

26. The Union Cabinet has given its approval for setting up of the EPPB. What is IPPB?

India Pre Payments Bank
Idea Post Payments Bank
India Post Payments Bank
India Post Pre Bank
Indian Post office Payments Bank

27. NBFC’s, any individual with 10 yr of experience in banking can apply for licenses of

Commercial Bank
Payment Bank
Small Bank
2 and 3
None of these

28. The India Post Payments Banfc Limited (IPPBL) has received the Certificate of Incorporation from the Registrar of Companies, Ministry of Corporate Affairs under the

Banking Rule, 1991
Banking Act, 1980
Companies Act, 2013
Companies Act, 1947
None of the above

29. Setting up of the IPPB to further financial inclusion was one of the budgetary announcements during

1998-99
2005-06
2011-12
2013-14
2015-16

30. Unified Payments Interface has been developed by NPCI. What is NPCI?

New Payments Corporation of India
National Principle Corporation of India
National Payments Company of India
National Payments Corporation of India
National Payments Corporation of Interface

31. The limit on transaction through UPI system is

₹ 10 thousand
₹ 50 thousand
₹ 1 lakh
₹ 5 lakh
₹ 10 lakh

32. Capital requirement of minimum paid-up equity is

₹ 25 crore
₹ 50 crore
₹ 100 crore,
₹ 200 crore
₹ 500 crore

33. UPI was launched on 11th April, 2016 in

Delhi
Mumbai
Bengaluru
Patna
None of these

34. At present, most transactions are done using….. system in the country.

NEFT
RTGS
IMPS
All of these
None of these

35. NPCI is the umbrella organisation for all retail payments system in India. It is being promoted by the

SBI
RBI
SEBI
CBI
BoB

36. The National Payments Corporation of India (NPCI) has implemented an electronic payment service termed as National Automated Clearing House (NACH) for

Banks
Financial institutions
Corporates
Government Departments
All of the above

37. NACH is a funds clearing platform similar to the existing

ECS
NEFT
RTGS
IMPS
All of these

38. NACH has both Debit and Credit variants and it aims at facilitating

Interbank
Debit transactions
Credit transactions
1 and 3
All of these

39. Mudra Ltd. was setup as a corporate subsidiary of…….. in March, 2015 prior to the launch of the Pradhan Mantri Mudra Yojana (PMMY) in April, 2015 .

IDBI
SIDBI
SBI
Gol
RBI

40. All those businesses that have been just started and looking for loan will fall in this category.

Shishu Category
Kishor Category
Tarun Category
1 and 2
2 and 3

41. A loan cover from 7 50000 to 5 lakhs will be given to units falling into this category.

Shishu Category
Kishor Category
Tarun Category
1 and 2
2 and 3

42. All small business which have been setup and established will fall into this category.

Shishu category
Kishor Category
Tarun Category
1 and 2
2 and 3

43. All scheduled commercial Banks in public and private sector with 3 yr of continuous profit track record, net NPAs not exceeding 3%, minimum net worth of……… and not less than 9% CRAR are eligible to lend loan.

₹ 10 crore
₹ 50 crore
₹ 100 crore
₹ 200 crore
₹ 500 crore

44. The prepaid payment instruments that can be issued in the country are classified under which categories

Closed system payment instruments
Semi-closed system payment instruments
Semi-open system payment instruments
Open system payment instruments
1, 2 and 4

45. The union cabinet has given its approval for setting up of the IPPB as a public limited company. What is BPPB?

India Post Private Bank
Indian Post Public Bank
Indian Post Providing Bank
India Post Payment Bank
Indian Public Providing Bank

46. A core banking system is the software used to support a bank’s most

Prepaid transactions
Post transactions
Abnormal transactions
Common transactions
Specific -transactions

47. A small bank can transform into a full-fledged bank, but only after

SBI’s approved
Gol’s approved
RBI’s approved
Finance minister’s approved
None of the above

48. Mudra Ltd. has been functional since 8th April, 2015. What is MUDRA?

Micro Units Development or Refinance Agency
Micro Units Development and Refinance Agent
Micro Units Developed and Refinance Agency
Micro Units Development and Refinance Agency
Mini Units Development and Refinance Agency

49. Under the guidelines of Pradhan Mantri Mudra Scheme, Mudra Bank has launched of its intiative product.

50. Mudra bank has been setup with only one goal in mind

fulfilling all the Funding needs of Small Businesses
fulfilling all the Funding needs of Corporate Small Businesses
fulfilling all the Funding needs of Non-Corporate Businesses
fulfilling all the Funding needs of Non-Corporate Small Businesses
fulfilling all the Funding needs of Corporate Businesses

51. Dilip Shantilal Shanghvi (Sun Pharmaceuticals) started

Small Banks
Payment Banks
Anywhere Banks
IPPB
IMPS

52. For the initial 3 yr, prior approval will be required for branch expansion of

Commercial bank
Payment bank
Small bank
Private bank
All of the above

53. A loan cover under Kishor Category of MUDRA Yojana is

upto ₹ 50000
₹ 50000 to ₹ 2 lakh
₹ 2 lakh to ₹ 5 lakh
₹ 50000 to ₹ 5 lakh
₹ 50000 to ₹ 10 lakh

54. Customer Relationship Management activities are elements of

Payment Banking
Small Banking
Core Banking
Post Payment Banking
None of these

55. The primary motive of NACH is to

handle low value, high volume transaction base on electronic files
reducing the dependency on international card schemes’
refinance of MFIS to encourage entrepreneurship
1 and 2
None of the above

56. Elements of core banking include

Processing cash deposits and withdra-
Processing Payments and cheques
Calculating interest
All of these
None

57. UPI provided a mobile personal identification number which will be similar to

Password of mail
ATM PIN
OTP Number
Train Number
Indian Currency

58. All restructured RRBs having net NPA within 3% are eligible under

Small Bank
PMM Scheme
Payment bank
IPPB
All of these

59. AWB offers you greater flexibility, transaction power, convenience and ease in banking. What is AWB?

Anywhere banking
All wonder banking
Any working banking
All working banking
All will banking

60. IPPB will start operations in March, 2017 and will cover the entire country by the end of financial year

2017-18
2018-19
2019-20
2020-21
None of these

61. National Payments Corporation of India was founded in

1998
2003
2004
2008
2012

62. Consider the following statements.
I. NACH is a funds clearing platform.
II. NACH has both debit and credit variants.
III. NACH will replace ESS in 2018.
Which of the above statements is/are correct?

I and II
II and III
I and III
Only II
I, II and III

63. Consider the following statements regarding payments bank.
They can issue ATM/debit cards.
FDI of 74% is allowed in payment banks. ID. In August 2011, RBI gave nod to 11
entities to start Payment Bank.
Which of the above statements is/are correct?

Only III
I and II
II and III
All of these
None of these

64. Consider the following features of small banks.
I. They can accept any deposit like commercial banks.
II. Their off operation will be restricted,
III. Small finance banks will be allowed to lend money also.
Which of the above statements is/are correct?

I and II
II and III
I, n and III
I and III
Only III

65. Mudra Bank will deliver the loan through
I. NBFCs
II. Rural Banks
III. District Banks
IV. Primary Lending Institutions
V. Nationalise Bank
Codes

I, II and III
II, III and IV
III, IV and V
II, III, IV and V
All of these

66. Elements of core banking include
I. Making and servicing loans.
II. Opening new accounts.
III. Processing cash deposits and withdrawals.
IV. Processing payments and cheques
Codes

I and IV
I, II and III
I, II, III and IV
II, III and IV
III and IV

67. The prepaid instruments can be issued as
I. smart cards;
II. magnetic stripe cards;
III. internet accounts;
IV. internet wallets;
V. mobile accounts;
VI. mobile wallets; and
VII. paper vouchers.
Codes

I, V, VI and VII
I, II, III and VII
I, II, III, IV and V
I, II, in, IV and VII
All of these

68. Small banks can undertake financial services like
I. distribution of mutual fund units
II. Insurance products
III. Pension products
Codes

Only III
I and III
I, II and III
I and II
II and III

69. Select the important feature of UPI from the following
I. All UPI-enabled banks will allow their apps to be consolidated.
II. The service is available 24 X 7.
III. Charges can be applied depending on the amount of money transferred.
Codes

Only I
I, n and III
I and III
II and III
Only III

70. IPPB services will be linked to post offices and alternative channels riding on modern technology including
I. ATMs
II. Mobiles
III. simple digital payments
IV. PoS/m-PoS devices
Codes

I and IV
I, II and III
I, II, III and IV
II, III and IV
III and IV

71. Choose the correct statement(s).
I. Banks Board Bureau (BBB) is an autonomous body of Union Government of India.
II. Former Comptroller and Auditor General (CAG) Vinod Rai has been appointed as the last Chairman of BBB.
III. BBB is a part of a seven-pronged plan for PSBs dubbed as Indradhanush (rainbow) plan.
Which of the above statements is/are correct?

I and II
II and III
I and III
I, II and III
Only III

72. Small Bank can accept any deposit
I. Savings deposits
II. Current deposits
III. Fixed deposits
IV. Recurring deposits
Codes

I,II and IV
II and IV
I, II, III and IV
II, III and IV
I and IV

73. Payments banks can issue
I. ATM/debit cards
II. Credit cards
III. other prepaid payment instruments
Codes

I and III
Only I
II and III
Only in
All of these

74. The key Reforms under Indradhanush mission is/are
I. Appointments
II. Bank Board Bureau
III. Capitalisation
IV. De-stressing PSBs
V. Empowerment
Codes

I, n and V
I, n, m and IV
I, n, III, IV and V
III, IV and V
None of the above

75. According to Reserve Bank of India (RBI) guidelines, payment banks are not permitted to [RBI Grade B 2015]

setup branches/ATMs
undertake utility bill payment services
issue debit cards
distribute insurance/mutual fund/pension products
undertake non-banking financial through subsidies

76. National Automated clearing house is a centralised clearing system launched by [SBI Clerk 2015]

National Payments House
Indian Payments House
Indian Payments getway
National Payments Corporation of India
None of the above

77. Maximum Loan that can be taken from a small finance bank [SBI Clerk 2015]

₹ 5 lakh
₹ 10 lakh
₹ 15 lakh
₹ 20 lakh
₹ 25 lakh

78. Small finance banks will also have to ensure that 50% of their loan portfolio constitutes advances of upto [SBI PO 2016]

₹ 5 lakh
₹ 10 lakh
₹ 20 lakh
₹ 25 lakh
₹ 30 lakh

79. NACH was launched by [SBI PO 2016]

NPI
NCI
NPCI
MPCI
MPCII .

80. Capital small finance bank limited has its headquarter at [SBI PO 2016]

Jalandhar
Dehradun
Patna
Jaipur
Bengaluru

81. Non-farm micro units are eligible for how much loan under Mudra scheme? [SBI PO 2016]

₹ 5 lakh
₹ 10 lakh
₹ 20 lakh
₹ 25 lakh
₹ 30 lakh

82. Fino pay tech is which type of bank? [SBI PO 2016]

micro bank
small bank
payment bank
digibank
None of these

83. Maximum amount in Mudra scheme is [SBI Clerk 2016]

₹ 5 lakh
₹ 10 lakh
₹ 15 lakh
₹ 20 lakh
₹ 25 lakh

84. MUDRA is the subsidiary of [Bank of Maharastra PO 2016]

RBI
SBI
SIDBI
NABARD
IDFC

85. What does I stand for in UPI [Bank of Maharastra PO 2016]

India
Interface
International
Institution
Ink

86. NACH debit is the product of [Bank of Maharastra 2016]

NPCI
NFS
AEPS
ANBC
SBI

87. Which organisation is an umbrella organisation for all retail payments system in India [Bank of Maharastra PO 2016]

RBI
SBI
NPCI
ANBC
NFS

Answer Key

Banking Awareness Study Material – Financial Reforms in Banking Sector

April 4, 2018 by Anthony Leave a Comment

Banking Awareness Study Material – Financial Reforms in Banking Sector

Banking Awareness Study Material Computer Awareness Marketing Aptitude

A new era of banking industry in India was started after independence. In this era, efforts were made to improve banks’s methodology and responsibilities and various committees were formed in this regard. Apart from this, banks also took various steps to improve their working procedure.

Important Acts Related to Banking Regulation

Banking Regulation Act, 1949
The Banking Regulation Act, 1949 came into force on 16th Mar, 1949. It contained various aspects related to Banking Companies in India.
Its purpose is to

provide safety in the interest of depositors;
prevent misuse of powers by managers of banks;
see that the act does not supersede, but supplements to the Companies Act, 1956.

State Bank of India Act, 1955
Imperical Bank of India was transformed into SBI through SBI Act, 1955 passed by Indian Parliament. As a result of it banking services were expanded to rural as well as semi-urban areas.

The State Bank of India
(Subsidiary Banks) Act, 1959 This Act provides the formation of Certain Government or Government Associated Banks as subsidiary of the State Bank of India.

Banking Laws
(Miscellaneous Provisions) Act, 1963 With a view to restraining the control exercised by particular group of persons over the affairs of banks and to providing for stricter Control Over Bank by the Reserve Bank, the banking laws (miscellaneous provisions) Act was passed in 1963.

Banking Law (Amendment) Act, 1968
In this act, it was decided as to which businesses banks are allowed to give loans. The role of banks in the areas of economic and social development was also specified.

The Banking Companies
(Acquisition and Transfer of Undertakings) Act, 1970 As per this act, no shareholder of the Corresponding New Bank, other than the Central Government shall be entitled to exercise voting rights in respect of any shares held by him. Under this provision, 14 banks were nationalised in 1970.

Regional Rural Banks Act, 1976
Regional Rural Banks were established under the provisions of an Ordinance passed on 26th Sep, 1975 and the RRB Act, 1976 to provide sufficient banking and credit facility for agriculture and other rural sectors. These were setup on the recommendations of the Narasimham working group.

SARFAESI Act, 2002
The full form of Sarfaesi Act is Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Banks utilise this act as an effective tool for bad loans (NPA) recovery. It is possible that non performing assets are backed by securities charged to the bank by way of hypothecation or mortgage or assignment.
Upon loan default, banks can seize the securities (except agricultural land) without intervention of the court. Sarfaesi is effective only for secured loans where bank can enforce the underlying security e.g. hypothecation, pledge and mortgages. The Sarfaesi Act, 2002 gives powers of ‘seize and desist’ to banks. Banks can give a notice in writing to the defaulting borrower requiring it to discharge its liabilities within 60 days.

Amendments to Sarfaesi Act (in 2016)
It allows District Magistrate (DM) to take possession over collateral within 30 days for securing the creditors. It empowers District Magistrate (DM) to assist banks to take over the management of a company, in case the company is unable to repay loans. It creates a central database to integrate records of property registered under various registration systems with central registry meant for maintaining records of transactions related to secured assets.

RBI Amendment Act, 2006
In 2006, Government amended the RBI Act, 1974 , and the Banking Regulation Act. Under the act, Government removed the floor and CAR on CRR and floor on statutory liquidity ratio to provide flexibility to the RBI to manage liquidity. After this, RBI was not required to pay any interest on the CRR deposits of banks. The amendments also established RBI as regulator of the bond market and the currency market.

The Banking Laws (Amendment) Bill, 2011
This Bill would strengthen the regulatory powers of Reserve Bank of India (RBI) and to further develop the banking sector in India. It will also enable the nationalised banks to raise capital by issue of preference shares or rights issue or issue of bonus shares.

The salient features of the bill are as follows:

To increase the cap on restrictions on voting rights.
To provide for special audit of co-operative banks at instance of RBI.
To enable the nationalised banks to raise capital through ‘bonus’ and ‘rights’ issue and also enable them to increase or decrease the authorised capital with approval from the Government and RBI without being limited by the ceiling of a maximum of ? 3000 crore.
Voting rights in banks may be restricted up to 26%.

Committees Related to Banking Sector Reform
Various committees related to Banking Sector Reform are as follows

Narsimham Committee I, 1991
This committee was setup on August* 1991 in order to study the problems of the Indian financial system and to suggest recommendations for improvement in the efficiency and productivity of financial institutions under following areas.

The committee recommended their gradual reduction of SLR to 25% and CRR to 3.5%.
The committee recommended that the actual number of public sector banks need to be reduced.
Regarding the Regional Rural Banks (RRBs), it recommended that they should focus on agriculture and rural financing.
The committee recommended the establishment of an Asset Reconstruction Fund (ARF). This fund would take over the proportion of the bad and doubtful debts from the banks and financial institutes. It would help banks to get rid of bad debts.
It considered and recommended that the RBI should be the only main agency to regulate banking in India.
The committee recommended that the public sector banks should be free and autonomous.
Some of these recommendations were later accepted by the Government of India and became banking reforms.

Narsimham Committee II, 1998
This committee was setup on 26th Dec, 1997. It submitted its report to the government in April, 1998 with the following recommendations

The committee considered the stronger banking system in the context of the Current Account Convertibility (CAC).
It recommended ‘Narrow Banking concept’ where weak banks would be allowed to place their funds only in short term and risk free assets.
The committee recommended that the government should raise the prescribed capital adequacy norms.
The committee considered that there was an urgent need for reviewing and amending main laws governing Indian banking industry like RBI Act, Banking Regulation Act, State Bank of India Act, Bank Nationalisation Act, etc.

Damodaran Committee, 2011
The committee, headed by former SEBI Chairman M Damodaran, was setup by the Central Bank to look into the issues of customer services and evaluate the existing system of grievance redressal mechanism prevalent in banks, its structure and efficacy and recommend measures for expeditious resolution of complaints.

Recommendations of the Committees

Bank should offer No Frill Saving Accounts with certain basic facilities such as cheque book and ATM card without prescribing any minimum balance.
All fixed deposit receipts should prominently indicate the annualised interest rate to help customers take more informed decisions.
The Indian Banks Association should standardise the account opening form for all banks, similar to the one used for loans. Title deeds of property should be returned to customers within 15 days of the full settlement of home loans.

MV Nair Committee, 2011
The Reserve Bank had constituted the Committee under the chairmanship of Shri M V Nair on 25th Aug, 2011 pursuant to the announcement made in the Monetary Policy Statement 2011-12. The Committee was to re-examine the existing classification and suggest revised guidelines with regard to priority sector lending and related issues.

Nachiket Mor Committee, 2013
The RBI appointed a committee on comprehensive financial services for small businesses and low income under the Chairmanship of Sri Nachiket Mor member of the Central Board of Directors, RBI in the month of September, 2013. Motive of the panel is to frame a clear and detailed vision for financial inclusion and financial depending in India.

Recommendations of Nachiket Mor Committee
Recommendations of the Committee are as follows:

Every adult (above 18 yr) of our country should have a bank account by 1st Jan, 2016. This account will be known as Universal Electronic Bank Account (UEBA).
Every resident should be issued an account at the time of receiving Aadhaar number (UIDAI) by a bank itself.
It recommends abolition of interest subsidies and loan waivers. It suggested that government should transfer benefits directly to farmers.
It recommends for payment Bank.
Permission to banks for pricing farm loans below base rate should be withdrawn.
Statutory Liquidity Ratio has outlived its utility for both banks NBFCs.
It recommends raising priority sector lending cap for bank to 50% from the current 40%.

Bimal Jalan Committee/New Bank Licences, 2014
A committee, under the chairmanship of former RBI Governor Bimal Jalan, was constituted to scrutinise the application for new banks in India. The committee submitted it’s report in February 2014, recommending for the ‘in-principle’ approval of banking licenses to Bandhan Microfinance and IDFC (Infrastructure Development and Finance Corporation). Within a period of 18 months these two entities are required to

get a net worth of ? 1000 crore or more;
open at least 25% branches in unbanked rural areas.
These new banks will be provided licence under the Banking Regulation Act, 1949 (Section 22(1)), only after the fulfillment of these two conditions.

Bandhan Finance
It is a microfinance company, based in West Bengal (Kolkata). It is headed by Shri Chandra Sekhar Ghosh and has a net worth of ? 1100 crore. About 45% of its branches are in the rural areas. ‘Bandhan Bank’ received ‘in-principle’ approval of the RBI in April 2014, the banking regulator gave its final nod in June 2015. Bandhan Bank started operating banking services on 24 August, 2015.

IDFC
The Infrastructure Development and Finance Corporation (IDFC) is based in Mumbai. It is originally an investment finance company, headed by Shri Rajiv Lai. IDFC has the net worth of ? 21000 crore, but with a lower rural presence. IDFC started operating banking services on 1st Oct, 2015 under RBI Banking licence.

Deepak Mohanty Committee, 2015

The Reserve Bank of India (RBI) has constituted a committee on 15th July, 2015 to prepare five year action plan to spread the reach of financial services across country to unbanked population. The Committee will be headed by RBI Executive Director Deepak Mohanty and comprise total of 14 members. Deepak Mohanty is an economist at India’s Central Bank, the Reserve Bank of India (RBI). He holds the post of Executive Director at the Head Office of RBI in Mumbai.

Various other Committees of Banking Reform

Innovative Banking
In India, public sector banks have also started to boost Innovative activities related to banking sector. A concise description of these activities is given below

Know Your Customer (KYC) Norms

The Reserve Bank of India advised banks to make the Know Your Customer (KYC) procedures mandatory while opening and operating the accounts. At the time of opening an account, bank has to ensure that the prospective customer is the person who he/she claims to be. This is to prevent fraudsters using the name, address and forged signature of others for doing fraudulent transactions, benami transactions, encashment of stolen cheques, drafts, dividend, warrants, etc.

Relaxed KYC Procedure
The relaxation in KYC procedures is applicable for low income group customers. Individuals falling under the ‘No Frill Accounts’. Low income group customers are those who keep balances not exceeding ? 50000 in all their accounts (FDR/CA/SB) taken together and total credit summation in all the accounts taken together is not exceed ₹ 1 lakh in a year

The documents required by bank under KYC
‘Proof of identity’ under KYC	These six documents are Passport, Driving Licence, Voter’s Identity Card, PAN Card, Aadhaar Card issued by UIDAI and MNREGA Job Card. Customer need to submit any one of these documents as proof of identity
‘Proo of address’ for bank	Bank statement, electricity/telephone bill, credit card statement (should be not more them 3 months old). or, any officietlly vedid document which contains address details.

New Guideline for KYC
These are as follows

RBI has rectified the criteria of KYC for dealing with the problems coming in the completion of KYC process of identification of bank customers. The guidelines related to this were issued on 23rd July, 2013.
As per revised laws of RBI, the KYC formalities must be fulfilled in the following format
- High risk customers—once in two years.
- Medium risk customers—once in 8 years.
- Low risk customers—once in 10 years
As per the RBI’s new rules, banks are allowed to adopt system of current identification for making strong relation with their customers.

Mutual Banking
It is a financial institution chartered by a central or regional government, without capital stock, that is owned by its members who subscribe to a common fund. From this fund claims, loans etc., are paid. Profits after deductions are shared among the members. The institution is intended to provide a safe place for individual members to save and to invest those savings in mortgages, loans, stocks, bonds and other securities and to share in any profits or losses that result. The members own the business. ,

Factoring
It is a financial transaction in which a business sells its accounts receivable (i.e. invoices) to a third party (called a factor) at a discount. Factoring is a process of fulfilling the credit requirement by lending of material or asset to another person. This process is very popular in manufacturing industries.

Venture Capital (VC)
It is financial capital provided to early stage, high potential, high risk, growth startup companies. The venture capital fund earns money by owning equity in the companies it invests in, which usually have a novel technology or business model in high technology industries, such as biotechnology, IT and software.

Microfinance
It is a source of financial services for entrepreneurs and small businesses lacking access to banking and related services. The two main mechanisms for the delivery of
financial services to such clients are as follows

Relationship-based banking for individual entrepreneurs and small businesses.
Group-based models, where several entrepreneurs as a group come together to apply for loans and other services.

Islamic Banking
A banking system that is based on the principles of Islamic law (also known Shariah) and is guided by Islamic economics, is known as Islamic Banking. Two basic principles behind Islamic banking are the sharing of profit and loss and is significantly, the prohibition of the collection and payment of interest. Collecting interest is not permitted under Islamic law. The Dubai Islamic Bank has the distinction of being the world’s first full-fledged Islamic bank founded in 1975. Saudi Arabia’s Islamic Development Bank has decided to open its first branch in India at Ahmedabad, Gujarat.

Electronic Banking
Electronic banking, also known as Electronic Funds Transfer (EFT), is simply the use of ¹ electronic means to transfer funds directly from one account to another, rather than by cheque or cash. Some important electronic banking services.

Direct Deposit and Withdrawal Services: It allows consumers to authorise specific deposits, such as paycheques or social security cheques, to their accounts on a regular basis.
Payment by Phone Systems: Let consumers phone their financial institutions with instructions to pay certain bills or to transfer funds between accounts.
Point-of-Sale (POS) Transfer Terminals: It allows consumers to pay for retail purchase with a cheque card, a new name for debit card. This card looks like a credit card, but with a significant difference— the money for the purchase is transferred immediately from your account to the store’s account.
Personal Computer Banking Services: It offers consumers the convenience of conducting many banking transactions electronically using a personal computer (PC).
Internet Banking: Such of system allows setting up of various access levels for specific user groups and controlling the authorisation levels and transaction limits, as assigned to various employees of your company.
Home Banking: The practice of conducting banking transactions from home rather than at branch locations is known as Home Banking. Home banking generally refers to either banking over the telephone or on the internet.
Smart Cards: It is sometimes called stored-value cards, have a specific amount of credit embedded electronically in the card.
Direct Deposit System: It is also known as direct credit. It is a banking term that describes a deposit of money straight from the source into a bank account, by electronic funds transfer or other means where the payment is initiated by the payer not the payee. The money is transferred directly to the recipient bank through a payment system.
Mobile Banking: It is a system that allows customers of a financial institution to conduct a number of financial transactions through a mobile device such as a mobile phone or personal digital assistant.
The Indian Financial Network: [INFINET] It is the communication backbone for the Indian Banking and Financial Sector. All banks in the public sector, private sector, co-operative etc., and the premier financial institutions in the country are eligible to become members of the INFINET.

Banking Ombudsman

Banking Ombudsman Scheme was introduced by the RBI in 14 June, 1995 under the Banking Regulation Act, 1949. It is a senior official appointed by RBI to redress customer complaints against deficiency in certain banking services.
Decision of Banking Ombudsman can be appealed against to the appellate authority (vested in a Deputy Governor of RBI).
Banking Ombudsman can award compensation to the complainant. In this, it takes into account the loss of the complainant’s time, expenses incurred and the harassment and mental anguish suffered.
It has jurisdiction over all Commercial Banks, RRBs, Scheduled primary co-operative banks, NBFCs, etc. It deals with matters less than or equal to ? 10 lakh.

Board of Financial Supervision
It was constituted in November 1994, as a committee of the Centred Board of Directors of the Reserve Bank of India with an objective to undertake consolidated supervision of the financial sector comprising commercial banks, financial institutions and non-banking finance companies.

Central Board of Banking Fraudulence
It was established by Finance Minister in year 1997. It was established to enquiry about CBI cases pertaining to officers of rank of chief managers.

Debts Recovery Tribunal
The Debts Recovery Tribunal have been constituted under Section 3 of the Recovery of Debts due to Banks and Financial Institutions Act, 1993. The original aim of the Debts Recovery Tribunal was to receive claim applications from Banks and Financial Institutions against their defaulting borrowers. The Debts Recovery Tribunal of India have become model institutions for many a country to follow

Electronics Reforms of Banks
These are as follows

National Electronic Funds Transfer (NEFT)

It is a nation wide system that facilitates individuals, firms and corporates to electronically transfer funds from any bank branch to any individual, firm or corporate having an account with any other bank branch in the country.
Even such individuals, firms or corporates who do not have a Bank account can also deposit cash at the NEFT. Enabled branch with instructions to transfer funds using NEFT.
There is not limit either minimum or maximum on the amount of funds that could be transferred using NEFT.

Electronic Clearing Service (ECS)

The Reserve Bank of India has introduced Electronic Clearing Service (ECS).
This uses a series of electronic payment instructions for transfer of funds instead of paper instruments.
The ‘ECS-Credit’ enables companies to pay interest or dividend to large number of beneficiaries by direct credit of the amount to their Bank accounts.
‘ECS-Debit’ facilitates payment of charges to utility services, such as electricity, telephone companies, payment of insurance premium and loan instalments, directly to the customer’s account with a bank.

Magnetic Ink Character Recognition (MICR)

MICR is a technology which allows machines to read and process cheques enabling thousands of cheque transactions in a short time.
The MICR encoding, called the MICR line, is at the bottom of cheques and other vouchers and typically includes the documents-type indicator, bank code, bank account number, cheque number, cheque amount, and a control indicator.
MICR code is usually a nine digit code comprising of some important information about the transaction and the bank. The first three digits in the MICR code represent the city code that is the city in which the bank branch is located.
In most cases it is in line with the PIN code of the postal addresses in India. The next three digits stand for the bank code while the last three digits represent the bank branch code.

Cheque Truncation System (CTS)

CTS or Image-based Clearing System (ICS), in India, is a project undertaken by the Reserve Bank of India (RBI) in 2008, for faster clearing of cheques.
CTS is based on a cheque truncation or online image-based cheque clearing system where cheque images and magnetic ink character recognition (MICR) data are captured at the collecting bank branch and transmitted electronically.

Real Time Gross Settlement System

RTGS system is a funds transfer mechanism for transfer of money from one bank to another on a ‘real time’ and on ‘gross basis’.
This is the fastest possible money transfer system through the banking channel.
Settlement in ‘real time’ means payment transaction is not subject to any waiting period. The transactions are settled as soon as they are processed. ‘Gross settlement’ means the transaction is settled on one to one basis without bunching with any other transactions.
The RTGS system is primarily meant for large value transactions. The minimum amount to be remitted through RTGS is ? 2 lakh. There is no upper ceiling for RTGS transactions.

Indian Financial System Code (IFSC)

IFSC or Indian Financial System Code is an alphanumeric code that identifies a bank branch participating in the NEFT.
This is a 11 digit code with the first 4 alpha characters representing the bank and last 6 numeric characters representing the branch.
IFSC is used by NEFT (RTGS) to route the messages to the destination Banks/ Branches. RBI directs the Bank to print IFSC code on passbooks and statement of accounts.

International Financial Reporting Standards (IFRS)
IFRS are set of International Accounting Standards stating how particular types of transactions and other events should be reported in financial statements. IFRS are issued by the International Accounting Standards Board. IFRS are sometimes confused with International Accounting Standards (IAS), which are the older standards that IFRS replaced. (IAS were issued in 1973 and lasted till 2000.) IAS were issued between 1973 and 2001 by the Board of the International Accounting Standards Committee (IASC).

Tit-Bits

The first experiments with internet banking I? started in the early 1980s, but it did not become popular until the mid 1990s, when home internet access was widespread.
In 1999 Gujarat was the first Indian state to introduce a smart card license system.
Reserve Bank of India has stated that financial statements of banks need to be International Financial Reporting Standards (IFRS) compliant for periods beginning on after 1st April, 2011.

RBI Guidelines for Banks
These are as follows

RBI Guidelines for New Private Banks
RBI released the Guidelines for “Licensing of New Banks in the Private Sector” in February, 2013. As a part of the guidelines, RBI provided several parameters.

Should have a’past record of sound credentials and integrity, be financially sound with a successul track record of 10 yr.
At the start of banking operations non-operative financial holding company (NOFGC) should hold a minimum of 40% of the equity capital of the bank with a lock-in period of five years. Later, it has to be brought down to 15 percent within 12 yr from that onwards.
Separate set of RBI norms Condition of to launch 25% of branches in unbanked rural areas with population upto 9,999. New bank should also achieve priority sector lending target of 40%.
FDI is capped at 49% for first five year, later as per extent norms.
The initial minimum paid-up voting equity capital for the bank shall be 5 billion. The NOFHC shall initially hold a minimum of 40 per cent of the paid-up voting equity capital of the bank which shall be locked in for a period of five years and which shall be brought down to 15 per cent within 12 yr.

RBI allowed Banks to Merge, Shift or Close Branches in Urban Areas
RBI has taken decision to allow banks to merge, shift or close branches in urban areas on their own discretion. In this regard, RBI has issued a notification that mention detailed provisions of above decisions. This move will give banks greater operational freedom but it would not be valid for rural areas. As per RBI notification – Merger, shifting or closure of any rural branch as well as a sole semi-urban branch will require prior approval of the District Level Review Committee (DLRC) or District Consultative Committee (DCC), Banks making changes should inform customers of its branch time before actual merger, shifting or closure of the office.

RBI Guidelines for Merger NBFCs
According to Reserve Bank of India (RBI), Non-Banking Financial Companies (NBFCs) will take its prior approval before buying shares of other NBFCs or for merger and acquisition with another entity. This rule will be applicable to both deposit taking and non-deposit accepting companies and any infringement of it may cost the company its registration. Prior written clearance of RBI would also be mandatory before approaching the Court or Tribunal seeking order for mergers or amalgamations with other companies or NBFCs.

RBI Guidelines for Minors’ Bank Accounts
As per the guidelines issued by the RBI, minors above 10 yrs of age have been allowed to open and operate independently savings bank account and use other facilities like ATM and cheque books. As per the modified guidelines by RBI:

All minors can now open a savings/fixed/recurring bank deposit account through either his/her natural guardian or legally appointed guardian.
The minors, who have attained 10 yrs of age, will be permitted to open and operate savings bank accounts independently.
The banks can also decide on the minimum documents which are required for opening of accounts by minors.

Question Bank

1. Real time gross settlement benefits

the customers
the banks
Reserve Bank of India
Both 1 and 2
None of these

2. The financial assistance of loans of ₹ 10000 by a bank to very a small borrower will be called

Business finance
Government finance
Micro finance
Small finance
KYC finance

3. Which of the following acts is specially launched to facilitate banks in recovery of bad loans?

RBI Act
Banking Regulation Act
Companies Act
Income Tax Act
SARFAESI Act

4. The Narasimham Committee I was setup to suggest some recommendations for improvement in the

efficiency and productivity of the financial institution
banking reform process
export of IT sector
fiscal reform process
None of the above

5. Narsimham Committee recommended to reduce SLR and CLR to

25% and 3.5% respectively
24% and 3.5% respectively
25% and 3% respectively
20% and 5% respectively .
25% and 5% respectively

6. Which of the following is not a recommendation of the Narsimham Committee, 1991?

Reduction of CRR and SLR
Phasing out directed credit programme
Reduction of Capital Adequacy Ratio
Establishment of ARF Fund
Autonomy to Public Sector Bank

7. Which of the following banks have entered capital market in the wake of Narasimham Committee recommendations?

State Bank of India
Oriental Bank of Commerce
Bank of India
All of the above
None of the above

8. The Narsimham Committee II was setup to suggest some recommendations for improvement in the

efficiency and productivity of the financial institution
banking reform process
export of IT sector
fiscal reform process
None of the above

9. One of the major challenges banking industry is facing these days is money laundering. Which of the following acts/norms are launched by the banks to prevent money laundering in general?

Know Your Customer Norms
Banking Regulation Act
Negotiable Instrument Act
Narcotics and Psychotropic Substance Act
None of the above

10. Which of the following are the recommendation of the Committee on Banking Sector Reforms (Narasimham Committee II)?

A general provision of 1% on standard assets should be introduced
Banks should bring out revised operational manuals and update them regularly
There is a need for disclosure in a phased manner of the maturity pattern of assets and liabilities, foreign currency assets and liabilities, movements in provision account and NPAs
All of the above
None of the above

11. The recommendations of the Committee on Banking Sector Reforms (Narasimham Committee II) include

the ‘Basel Core Principles of Effective Bank supervision’ should be regarded as the minimum to be attained
the banks and primary dealers alone should be allowed in the interbank call and notice money markets
opening the Treasury Bill market to foreign institutional investors for broadening its base
All of the above
None of the above

12. A working group on cheque transactions and E-cheques was constituted by the Reserve Bank of India under the chairmanship of Dr RB Barman and major recommendations of group include

the physical cheque will be truncated within the presenting bank
settlement will be generated on the basis of current MICR code line data
electronic images will be used for payment processing
All of the above
None of the above

13. Which of the following are the other recommendations made by the working group?

Grey scale technology will be deploy for imaging
Images will be preserved for eight years
A centralised agency per clearing location will act as an image warehouse for the banks
Both 1 and 2
All of the above

14. Every about (above 18 year) of our country should have a bank account by as recommended by Nachiket Mor Committee. This account will be known as

Universal transfer Bank Account
Universal Electronic Bank Account
Universal credit Bank Account
Universal saving Bank Account
Universal Natrual Bank Account

15. The Banking Regulation Act, 1949 came into force on…….

1st Jan, 1956
1st Mar, 1966
16th Mar, 1949
16th April, 1950
20th June, 1950

16. Issue related to voting rights

Banking Regulation Act, 1949
State Bank of India Act, 1955
The Banking Companies Act, 1970
RRB Act, 1976
None of the above

17. This act as an effective tool for bad loans recovery

RBI Amendment Act, 2006
The Banking Laws Bill, 2011
RRB Act, 1976
Sarfaesi Act, 2002
None of the above

18. ECB is a means of raising funds from overseas. What is its full form?

External Commercial Borrowing
Essential Commodities Borrowing
External Credit and Business
Essential Commodity Buyers
External credit Buyers

19. Know Your Customer (KYC) norms are required to be strictly followed by banks. It means

providing improved customer services
determining the identity and residence proof of account holders through approved documents
ensuring that staff members know the customers
organising regular customer service meetings
None of the above

20. Which of following is necessary to transfer funds through the RTGS facility?

Beneficiary’s bank account number
The IFSC number of the beneficiary’s bank branch
There is a minimum amount specified for transfer
All of the above
None of the above

21. How can a Indian Financial Services Code number be identified?

It is a 11 digit alphanumeric code
It is available on the cheque leaves of an individual’s cheque book
It is provided by the bank if asked
All of the above
None of the above

22. According to Sarfaesi Act, 2002, the registration and regulation of securitisation companies or reconstruction companies is done by

RBI
SEBI
SBI
All of these
None of these

23. The Sarfaesi Act amendment bill 2016 provides the facilities that the District Magistrate has to assist in the recovery process of the seemed creditors and complete process within

10 days
30 days
45 days
50 days
55 days

24. The Sarfaesi Act provides alternative methods for recovery of non performing assets

Securitisation
Asset Reconstruction
Enforcement of Security without the intervention of the Court
1 and 2
All of the above

25. The assets of the banks which do not perform are called

Non Performing Assets (NPA)
Bad loans
Fixed loans
1 and 2
All of the above

26. According to RBI, terms loans on which interest or instalment of principal remain overdue for a period of more than 90 days from the end of a particular quarter is called a

IFSC
ECS
NPA
CTS
MICR

27. In……. Gujarat was the 1st Indian State to introduce a smart Card License system.

2011
2012
2013
1999
2000

28. Bandhan Bank Ltd. received the ‘in-principle’ approval of the (RBI) for setting up a universal bank in

April, 2011
April, 2012
April, 2013
April, 2014
April, 2015

29. Which committee has been constituted to give recommendations on Fiscal Responsibility and Budget Management (FRBM)?

Ajay Shankar committee
NR Madhava Menon committee
NK Singh committee
H Devaraj committee
G C Gupta

30. Which committee has been constituted to examine the feasibility of a new financial year?

Shankar Acharya committee
Rajiv Kumar committee
KM Chandrasekhar committee
PV Rajaraman committee
None of the above

31. Reserve Bank of India (RBI) has constituted a committee to prepare a 5 year action plan to spread the reach of financial services across country to unbanked population. The committee will be headed by RBI executive director

Deepak Mohanty
Shankar Acharya
Rajiv Kumar
KM Chandrasekhar
PV Rajaraman

32. Prime Minister Narendra Modi’s government has ordered the formation of a Special Investigation Team (SIT) to investigate black money. The SIT will be headed by retired Supreme Court judge

Deepak Mohanty
Shankar Acharya
Rajiv Kumar
KM Chandrasekhar
MB Shah

33. The Reserve Bank of India (RBI) has setup an inter-regulatory working group to study the regulatory issues relating to Financial Technology (Fintech) and Digital Banking in India. The inter-regulatory working group will be headed by

Shankar Acharya
Rajiv Kumar
Sudarshan Sen
KM Chandrasekhar
MB Shah

34. The “Committee on Comprehensive Financial Services for Small Businesses and Low Income Households” was setup by the RBI under the chairmanship of

Rajiv Kumar
Sudarshan Sen
KM Chandrasekhar
MB Shah
NachiketMor

35. ……… was included in the 4 member RBI panel led by Bimal Jalan which examine applications for new bank licenses.

Rajiv Kumar
Sudarshan Sen
Nachiket Mor
KM Chandrasekhar
MB Shah

36. The Reserve Bank of India (RBI) panel on priority sector lending proposed increment in the target (priority sector) for foreign banks to

37. Reserve Bank panel headed by…. has made some important recommendations on priority sector lending.

M V Nair
Sudarshan Sen
Nachiket Mor
KM Chandrasekhar
MB Shah

38. The report on Customer Service in Banks by a committee chaired by

M Damodaran
MV Nair
Sudarshan Sen
Nachiket Mor
KM Chandrasekhar

39. KYC is the process of a business verifying the identity of its clients. What is Y in KYC?

Yield
Young
Your
You
Yes

40. RBI allowed bank to merge, shift or close branches

Rural areas
Semi-rural areas
Urban areas
1 and 3
None of these

41. The Reserve Bank of India introduced KYC guidelines for all banks in

2002
2007
2009
2010
2011

42. A mutual savings bank is setup specifically to be operated for the benefit of the

client
depositors
friend
creditor
None of these

43. Smart cards can provide

personal identification
authentication
data storage
application processing
All of the above

44. Islamic banking is banking or banking activity that is consistent with the principles of

Debit law
Credit law
Sharia
Indian banking law
Internation banking law

45. A lot of Banks in India these days are offering M-Banking Facility to their customers. What is the full form of ‘M’ in ‘M-Banking’?

Money
Marginal
Message
Mutual Fund
Mobile Phone

46. Which one of the following does not qualify as priority sector lending by commercial banks?

Software industries
Small business loans
Education loans
Small loans to rural educated unemployed
None of the above

47. Banking Ombudsman Scheme was introduced by the RBI in

1975
1980
1995
1998
2005

48. Factoring process is very popular in

Manufacturing industry
IT industry
Publication industry
Software industry
Medical industry

49. Which one of the following is incorrectly matched?
Committee Name Area Covered

YV Reddy Small Saving Reforms
Deepak Mohanty Base Rate
Justice MB Shah Financial Inclusion
AKKhandelwal HR Issues of PSBs
NK Singh Review, recommendations of FRBM Act

50. IDFC stands for

Infrastructure Development and Finance Corporation
Indian Development and Finance Corporation
Indian Development and Finance Company
Infrastructure Development and Finance Company
Infrastructure Deem and Finance Corporation

51. Central Board of Banking Fraudulence was established by Finance Minister of India in year

1985
1990
1997
2003
2011

52. Banking Ombudsman deals with matters less than or equal to

₹ 2 lakh
₹ 10 lakh
₹ 50 lakh
₹ 2 crore
₹ 10 crore

53. Recommendations for every adult (above 18 yrs) of our country should have a bank account by 1st Jan, 2016 was given by

Narsimham Committee
Bimal Jalan Committee
Deepak Mohan Committee
Mohanty Committee
Nachiket Mor Committee

54. This committee recommended that the public sector bank should be free and autonomous

Narsimham Committee
Nachiket Mor Committee
Mohanty Committee
Bimal Jalan Committee
None of the above

55. Which of the following is not a electronic banking services?

Mobile Banking
POS transfer
Home Banking
Home Loan
PC Banking Services

56. Which of the following is not an act related to Banking regulation?

Banking Laws Act, 1963
State Bank of India Act, 1963
RBI Amendment Act, 2006
1 and 2
All of the above

57. Consider the following statement(s) regarding IFRS.
I. IFRS are issued by the International Accounting Standards Board,
II. International Accounting Standards (IAS) was replaced by IFRS.
III. RBI has started IFRS in year 2015.
Codes

Only II
II and III
I and II
All of these
None of these

58. Consider the following statement(s) regarding IFSC.
I. IFSC is an alphanumeric code.
II. IFSC is a 11 digit code.
III. IFSC is used by NEFT.
Codes

I and II
II and Ed
I and m
I, II and III
Only III

59. Choose the correct statement(s) regarding Banking Regulation Act, 1949.
I. Provide safety in the interest of depositors,
II. Prevent misuse of powers by managers of banks.
III. Act does not supersede.
Codes

Only II
I and II
I, II and III
II and III
Only III

60. Choose the correct statement(s) regarding IDFC.
I. IDFC started operating banking services on 1st Oct, 2015.
II. IDFC is based in Mumbai.
III. It is originally on investment finance company.
Codes

I and II
II and III
II and III
I and III
None of these

61. Choose the correct statement(s).
I. Deepak Mohanty is an economist.
II. Deepak Mohanty Committee is constituted by RBI.
III. Mohanty Committee was constituted on 15 July, 2015.
Codes

Only I
I and II
II and III
I and III
All of these

62. Consider the following statement(s) regarding Bandhan Bank.
I. Bandhan Bank started operating its banking services on 1st Oct, 2016.
II.RBI gave its final nod for banking services in 2015,
III. Head office of Bandhan Bank in Kolkata.
Codes

Only II
II and III
I and III
I and II
All of these

63. Consider the following statement(s) regarding Islamic Banking.
I. It is based on the principles of Islamic law also known shariah.
II. The Dubai Islamic Bank is the world’s first full-fledged Islamic bank.
ID. Collecting interest is not permitted under Islamic law.
Codes

I and II
II and III
I and III
I, II and III
Only 111

64. Banks usually frame their KYC policies incorporating the following key elements
I. Customer Policy;
II. Customer Identification Procedures;
III. Monitoring of Transactions; and
IV. Risk management.
Codes

I, II and III
II and IV
I, in and IV
I, II, III and IV
II, III and IV

65. NEFT means [IBPS Clerk 2011]

National Electronic Funds Transfer System
Negotiated Efficient Fund Transfer System
National Efficient Fund Transfer Solution
Non-Effective Fund Transfer System
Negotiated Electronic Foreign Transfer System

66. Which of the following is the purpose of introducing ‘Know Your Customer’ norms by the banks? [SBI PO 2011]

To bring more and more people under the banking net
Identifying people who do not pay income tax
To ensure that the money deposited in banks has come from genuine sources
To ensure whether the money deposited in the bank is of an India or a foreign national
None of the above

67. Which of the following is the popular name of the norms by which a bank satisfies itself about the customer’s identity and activities? [Corporation Bank 2011]

Basel norms
KYC norms
Service norms
Lending norms
None of these

68. Which of the following is/was not included in the agenda set for the banking reforms in India? [Andhra Bank 2011]

Dismantling of administered interest rates
Measures to strengthen risk management
Promulgation of Sarfaesi Act
Promotion of the concept of easy credit to all with a guaranteed subsidy from government
Granting of operational autonomy to public sector banks and allowing them to raise capital from the open market

69. In respect of which one of the following areas, YH Malegam Committee has submitted its recommendations? [Andhra Bank 2011]

Interest on Microfinance loans
Teaser loans
Rural development
Advances to agriculture
None of the above

70. Many times we read a term CBS used in banking operations. What is the full form of the letter C in the term ‘CBS’ ? [Indian Overseas Bank 2011]

Complete
Credit
Continuous
Core
None of these

71. The YH Malegam Committee, which submitted its report a few months back, was setup to report on further improvement of functioning of [RBI Grade B 2011]

Micro Finance Institutions
Stock Exchanges in India
Cooperative Banks
Regional Rural Banks
Foreign Banks having offices in India

72. Banking Ombudsman Scheme is applicable to the business of [IBPS PO 2012]

all scheduled commercial banks excluding RRBs
all scheduled commercial banks including RRBs
only public sector banks
all banking companies
all scheduled banks except private banks

73. In which of the following fund transfer mechanisms, can funds be moved from one bank to another and where the transaction is settled instantly without being bunched with any other transaction? [IBPS PO 2012]

RTGS
NEFT
TT
EFT
MT

74. An ECS transaction gets bounced and you are unable to recover your money from your customer. Under which Act criminal action can be initiated? [IBPS PO 2012]

Indian Penal Code
Negotiable Instruments Act
Criminal Procedure Code
Payment and Settlements Act
Indian Contract Act

75. In which of the following fund transfer mechanisms, transaction is not subject to any waiting period? [SBI Clerk 2012]

RTGS
NEFT
TT
EFT
MT

76. General Clients of various banks in India can make a complaint to which of the following offices, on the issues related to deficiency in services which do not get resolved at banks’ level? [SBI Assistant 2012]

Comptroller and Auditor General of India
Attorney General of India
Ombudsman
Indian Audit Bureau
Indian Banks Association

77. Banking Ombudsman is appointed by……. [SBI PO 2013]

Government of India
State governments
RBI
ECGC
Exim Bank

78. With a view to providing a simpler, faster, reliable and cost effective solution for repetitive payment transactions such salary, pension, interest, commission, dividend, etc by companies, corporations and government departments, the Reserve Bank introduced in April, 1995

MICR Clearing [RBI Assistant 2018]
Electronic Funds Transfer (EFT)
Electronic Clearing Service (Credit) (ECS Credit)
Shared Payment Network System (SPNS)
None of the above

79. The ECS (Credit) envisages [RBI Assistant 2013]

substitution of the paper instrument by electronic instructions for bulk and repetitive payment transactions
use of cheques by corporate clients only
reduction of work load of clerical staff in banks
encouraging competition among public sector and private sector banks
None of the above

80. What is the individual credit limit under the ECS (Credit)? [RBI Assistant 2013]

₹ 25000
₹ 50000
₹ 1 lakh
₹ 5 lakh
No limit

81. The Reserve Bank of India recently issued guidelines allowing minors over 10 yr of age to operate bank account independently with a view to [SBI PO 2014]

promote financial inclusion
increase low cost deposits of banks
improve CASA percentage of banks
mobilise savings bank deposits of banks
To put ATMs and other infrastructure to optimum use

82. Which of the following is the correct full form of ECS often used in banking? [IBPS PO 2015]

Electronic Clash System
Electronic Cash Service
Electronic Clearing Service
Electronic Charging System
Other than those given as options

83. The abbreviation ‘EPoS’ stands for[IBPS PO 2015]

Electronic Payment of Sale
Electronic Point of Sale
Electronic Purchase of Sale
Electronic Price of Sale
Electronic Platform of Sale

84. The maximum amount that can be remitted through RTGS is [IBPS PO 2015]

₹ 1 crore
₹ 50 lakh
₹ 2 lakh
₹ 10 lakh
No upper ceiling

85. IFSC has how many digits? [IBPS PO 2015]

86. “Sarfaesi Act 2001” is applicable in banking industry for [SBI Clerk 2015]

regulating the service conditions of employee
appointment of nominee directors on the bank boards
Other than those given as options
streamlining documentation
facilitating enforcement of security for recovery of bad loans

87. Desirability and feasibility for new financial year committee headed by [SBI PO 2016]

SC Gupta
Sharkar Acharya
AK Khandelwal
YH Malegam
YV Reddy

88. NK Singh committee on [SBI PO 2016]

Base Rate
Financial Inclusion
Fiscal Responsibility and Budget Management Act
Money lending and Enforcement Machinery
Small Savings Reforms

89. What is the full form of the letter T in the term RTGS? [SBI Clerk 2016]

Time
Transaction
Tax
Transfer
Temporarily

90. Minimum age for saving account [SBI Clerk 2016]

Answer Key

Banking Awareness Study Material – Banking Regulation System of India

April 4, 2018 by Kalyan Leave a Comment

Banking Awareness Study Material – Banking Regulation System of India

Banking Awareness Study Material Computer Awareness Marketing Aptitude

The nature of banking business can be summarised in two words i.e. financial intermediation, which needs to be carried out efficiently for stimulating the real sectors of the economy. Another essential characteristic of banks is that they are highly leveraged and hence, need to be regulated for protecting the interest of depositors.
Banking in India, as elsewhere, takes diverse forms viz, banks formed under special statutes, companies registered under the Companies Act, 1956 or foreign companies and cooperative societies registered under the Cooperative Societies Act. Banks are classified on their ownership pattern such as Public Sector Banks, Private Sector Banks and Foreign Banks.

Indian Companies (Amendment) Act, 1936
The Indian Companies Act that was passed in 1913 introduced the institution of private companies in corporate sector in India. But the Act of 1913 did not provide the peculiar environment for Indian commerce, hence to remove these deficiencies, the Indian Companies (Amendment) Act was passed in 1936. The Amendment Act, 1936 introduced various provisions relating to functioning of directors, guaranteeing payment of provident fund to employess etc. Further in October 1942, Companies Act was amended so that any company which uses world ‘bank’, ‘banking’ or ‘banker’ shall be deemed to be a banking company.

Banking Regulation Act, 1949
The Banking Regulation Act, enacted in 1949, has been a milestone in the history of banking in India. This act provides a framework for regulation and supervision of commercial banking activity.

Reserve Bank of India
Reserve Bank of India is the Central Bank of our country. On the recommendation of Hilton Young Commission, it was established on 1st April, 1935 and in 1949 it was nationalised. The central office of the RBI is Bombay (now Mumbai). In terms of the preamble to the Reserve Bank of India Act, 1934, ‘The main functions of the bank are to regulate the issuing of bank notes and keeping the reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage’.

Governor of RBI
Its first Governor was Sir Osborne Smith. RBI was nationalised on 1st Jan, 1949 and its first Indian Governor was CD Deshmukh. Banking crisis during 1913-1917 and failure of 588 banks in various parts of the country underlined the need for regulating and controlling the commercial banks.

Governors of RBI and their Time -period

Organisation and Management of RBI
Reserve Bank of India is managed by the Central Board of Directors. Presently, this board consists of 21 members. Besides, Governor and four Deputy Governors, four directors are nominated, each by the four Local Boards for 4 yr term. Besides, ten directors and two government officer are nominated by the Government of India.
These boards have been established, in Mumbai, Kolkata, Chennai and New Delhi respectively. According to the Reserve Bank of India Act, the term of nominated members is for 4 yr. Governor and Deputy Governors are appointed by the government for a period of not more than 5 yr. Bank’s Head Office is located in Mumbai. The bank has 28 regional offices, most of which are in state capitals. The financial year of RBI starts from 1st July to 30th June. The annual report is released in August each year.

Central Board of RBI
RBI is wholly owned by the government in India. Central Board of directors oversees the Reserve Bank’s business. It delegates specific functions through its committees and sub-committees. It includes the Governor, Deputy Governors and a few Directors (of relevant local boards).
Sub-Committees of the Central Board:
It includes those on inspection and audit, staff and building. Focus of each sub-committee is on specific areas of operations. Its important subsidiary institutions are as follows

Board for Financial Supervision: It regulates and supervises Commercial Banks, Non-Banking Finance Companies (NBFCs), development finance institutions, urban Co-operative Banks and primary dealers.
Board for Payment and Settlement: Systems Regulates and supervises the payment and settlement systems.
Research Institutes: There are various RBI funded institutions to advance training and research on banking issues, economic growth and banking technology, such as, National Institute of Bank Management (NIBM) at Pune, Indira Gandhi Institute of Development Research (IGIDR) at Mumbai and Institute for Development and Research in Banking Technology (IDRBT) at Hyderabad.
Subsidiaries: Fully-owned subsidiaries include National Housing Bank (NHB), Deposit Insurance and Credit Guarantee Corporation (DICGC), Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL). The Reserve Bank also has a majority stake in the National Bank of Agriculture and Rural Development (NABARD).

Central Banking Functions
Central banking functions of RBI are as under

Issue of Paper Currency: The Reserve Bank is nation’s sole note issuing authority except one rupee notes which are issued by ministry of finance. It issues notes of the denomination of ₹ 2, ₹ 5, ₹ 10, ₹ 20, ₹ 50, ₹ 100, ₹ 500 and ₹ 2000. The bank has a separate department for note issuing. This is known as Issue Department.
Banker of the Government: The RBI has to work as an agent of the Central and State Governments. It performs various banking functions such as to accept deposits, taxes and make payments on behalf of the government. It works as a representative of the government even at the international level. It maintains government accounts, provides financial advice to the government. It provides overdraft facility to the government in case of financial crunch.
Banker of Banks and Lender of the Last Resort RBI: acts as a banker for all the Commercial Banks. All scheduled banks come under the direct control of RBI. All commercial as well as schedule banks have to keep a minimum reserve (3%) with the RBI. They have to submit weekly reports to RBI about their transactions. By performing 3 functions, the RBI helps the member banks significantly.

They are given below:

It acts as the lender of the last resort.
It is the custodian of cash reserves of Commercial Banks.
It clears and transfers the transaction. It acts as the central clearing house.

Regulatory Functions
Control of credit is the principal function of the Reserve Bank of India, Control of credit means expansion or contraction of credit. Reserve Bank of India makes use of all those methods of credit control that are adopted by other Central Banks in the world. The methods adopted by the Reserve Bank to control credit are studied under two parts

Quantitative Credit Control
To control the flow of quantum of credit, Reserve Bank adopts the measures which are as under

Bank Rate Rate: of interest that the Reserve Bank charges from other scheduled banks on the loans given to them is called bank rate.
Open Market Operations: It means that the bank controls the flow of credit through the sale and purchase of government securities in the open market.
Cash Reserve Ratio: (CRR) It is the amount of funds that the banks have to keep with RBI. If RBI decides to increase this rate the available amount with the banks comes down. RBI uses this method (increase of CRR rate), to drain out the excessive money from the banks.
Statutory Liquidity Ratio: (SLR) It is the ratio of liquid asset, which all Commercial Banks have to keep in the form of cash, gold and . unencumbered approved securities equal to not more than 40% of their total demand and time deposits liabilities.
Base Rate: It is the minimum rate set by the RBI below which banks are not allowed to lend to its customers. Base rate is decided in order to enhance transparency in the credit market and ensure that banks pass on the lower cost of fund to their customers.
Marginal Cost of Funds based Lender Rate: The RBI has issued new guidelines for setting lending rate by commercial banks under the name Marginal Cost of Funds based Lending Rate (MCLR). It has replaced the Base Rate system from April 2016, onwards. The MCLR regime is applicable on floating rate home loans and term loans to small and medium sized enterprises and , middle level corporates.
Marginal Standing Facility: MSF was announced by Reserve Bank of India (RBI) in its Monetary Policy (2011-12) and refers to the penal rate at which banks can borrow money from the Central Bank. MSF is always 1% greater than RRR. MSF came into effect from 9th May, 2014.
Priority Sector Lending: RBI introduced the system of Priority Sector lending to ensure that banks increase their involvement in the financing of priority sectors like agriculture, small industries, etc.
Liquidity Adjustment Facility: LAF is a monetary policy fool which allows banks to borrow money through repurchase agreements. LAF is used to aid banks in adjusting the day-to-day mismatches in liquidity. LAF was introduced for the first time in June, 2000 onwards. LAF consists of repo and reverse repo operations.
Repo Rate The rate: at which the RBI lends money to commercial banks is called repo rate. It is an instrument of monetary policy. Whenever banks have any shortage of funds, they can borrow from the RBI. Reduction in repo rate helps the commercial banks to get money at a cheaper rate and increase in repo rate discourages the commercial banks to get money as the rate increases and becomes expensive. Repo operations inject liquidity into the system.
Reverse Repo Rate: Reverse repo rate operation is when RBI borrows money from banks by lending securities. The interest rate paid by RBI in this case is called the reverse repo rate. Reverse repo operations absorb the liquidity in the system. The reverse repo will be 100 basis points below repo rate.

Tit-Bits

RBI continued to serve as the Central Bank to Burma (Myanmar), until Japanese occupation of Myanmar in April, 1947.
RBI continued to serve as Central Bank to Pakistan, until June, 1948.
The reverse repo rate will be kept 100 basis points lower than the repo rate. On the other . hand, Marginal Standing Facility (MSF) will be kept 100 basis points, higher than the repo rate.

RBI Controls; Inflation and Growth
RBI can influence Inflation and growth in the economy to a large extent through its instruments of control.
RBI squeezes out liquidity from the economy by selling securites, increasing repo rates, increasing CRR etc, then the demand in the economy is reduced and inflation is brought under control.
However, in case inflation is due to supply side shortages, RBI controls have less influence. Similarly, increasing liquidity in economy means that households have more money to consume, industries have more money to invest in plant and machinery etc., all of which lead to increase in economic activity

Monetary Policy: In India, monetary policy of the Reserve Bank of India is aimed at managing the quantity of money in order to meet the requirements of different sectors of the economy and to increase the pace of economic growth. The Union Government on 29th Sep, 2016 notified the constitution of the Monetary Policy Committee (MPC). As per the provisions, out of the six Members of monetary Policy Committee, three members will be from the RBI. The other three members MPC will be appointed by the Central Government.

Qualitative or Selective Credit Control
This refers to the control of specific credit mean for certain specific objectives, e.g. If the government wants to check the rising prices of wheat in India, the Reserve Bank may instruct the member banks not to give loans against the security of wheat. Traders will not get credit for the purchase of wheat and therefore, they will not be able to buy large quantities of wheat. This would bring down wheat prices as the credit squeeze is directed towards wheat alone. It is thus called selective control. These measures are as under

Change in Margin Requirements on: Loans Reserve Bank directs the member banks to change their margin requirement from time to time. First such direction was given by the Reserve Bank in May and September, 1956 regarding rice trade.
Maximum Limit of the Loans: With a view to checking speculation, Reserve Bank has fixed maximum limits of loans by the Commercial Banks. No scheduled bank is allowed to grant, loan exceeding ? 1 crore to any single party without the prior permission of Reserve Bank of India, according to its 20th Nov, 1965 Credit Policy. This restriction has since been withdrawn.
Rationing of Credit: It is yet another technique of selective credit control. Under this programme, the Reserve Bank fixed credit quota for member banks as well as their limits for the payment of bills’. Quota system was introduced in 1960.
Moral Persuasion: From time to time, Reserve Bank holds meetings with the member banks to seek their cooperation in effectively controlling the monetary system of the country. It advises against the expansion of credit, except to priority sector i.e. agriculture, small industries, etc.

Other Functions of RBI
Besides the above stated specific functions, the Reserve Bank of India performs the following other functions

Export Assistance: Reserve Bank gives loans to the export industries. These loans are given indirectly by refinancing the loans given by Export Import Bank and other banks.
Clearing House Functions: Being Central Bank of the country, the Reserve Bank also functions as clearing house. Interbanking obligations are conveniently settled through this house.
Change of Currency: The bank changes big notes into small ones and small notes into coins.
Transfer of Currency: The bank also facilitates the transfer of currency. It also issues demand Hundies on its branches.

Limitations on RBI
It has certain limitations as the RBI cannot function as the commercial banks, cannot give loans against the fixed assets. RBI cannot give unsecured loans to others.

Foreign Exchange Management
It is an essential function of the RBI. Being the Central Bank of the Country, Reserve Bank of India also regulates exchange rate of rupee in terms of foreign currencies. It tries to maintain stability of exchange rate.
In order to maintain the exchange rate stability, it has to bring demand and supply of the foreign currency close to each other. Reserve Bank deals with the currencies of only those countries which are members of IMF.

Percentage ratio of a financial institution’s primary capital to its assets (loans and investment), used as a measure of its financial strength and stability.

Tier-1 and Tier-2 Capital
These are as follows

Tier-1 Capital: is the core measure of bank’s financial strength from a regulator’s point of view. It is composed of core capital, which consists primarily of common stock and disclosed reserves (or retained earnings), but may also include non-redeemable non-cumulative preferred stock.
Tier-2 Capital: or supplementary capital, include a number of important- and legitimate constituents of a bank’s capital base.

Major Efforts of International Banking
Basel I Norms: Basel norms are set by Bank of International Settlement (BIS) in Basel, Switzerland. Central Bank of 55 countries are members to the BIS.

Basel II Norms: It is a guide to capital adequacy standards for lenders. The aim of Basel II is to better align the minimum capital required by Regulators (socalled regulatory capital) with risk.

Basel III Norms: It will become operational from 1st Jan, 2013 in a phased manner. It will be fully implemented by 31st Mar, 2019.

Banks to increase their core tier 1 capital ratio to 4.5%.
Provision for a counter-cyclical capital conservation buffer of 2.5% by 2019.
The total Capital to Risk Assets Ratio (CRAR) required Basel III is proposed at 10.5%.

Principles for Basel III
RBI released its guideline on Basel III capital regulation on 2nd May, 2012.

Indian banks have to maintain tier 1 capital or core capital atleast 7% of their risk weightage assets or ongoing basis.
The total capital ratio including tier 1 and tier 2 must be atleast 9%.
For tousle year ending 31st Mar, 2013 bank will have to disclose capital ratio computed under existing guidelines.

Basel III Guidelines, 2015
The Reserve Bank of India (RBI) released on 28th May, 2015, the draft guidelines on the Net Stable Funding Ratio (NSFR) under Basel III framework on liquidity standards for banks. The NSFR is defined as the amount of available stable funding relative to the amount of required stable funding.
The objective of the NSFR is to ensure that banks maintain a stable funding profile in relation to the composition of their assets and off-balance sheet activities. In draft guidelines released, the Central Bank said that banks will have to maintain Net Stable Funding Ratio (NSFR) from January, 2018.

Base Rate System

Base Rate system introduced in banking sector by the RBI with effect 1st July, 2010.
Base Rate system replaced by Benchmark Prime Lending Rate (BPLR) in 2003.
Base Rate System introduced on recommendation of Deepak Mohanty Committee-aims at enhancing transparency in lending rate of banks and enabling better transmission of monetary policy.

Money
It plays an important role in our life. Modern form of money includes paper notes and coins. In India, the Reserve Bank of India (RBI) is authorised to issue currency notes, on behalf of the Government of India. Further, there is legal sanction behind every currency, that implies that a rupee cannot be refused as a means of settling transactions in India. Thus, rupee is the universally accepted means of exchange in India.

Measures of Money Supply in India
Money supply is the stock of liquid assets held by the public which can be freely exchanged for goods and services. RBI calculates various concepts of money supply. These are known as measures of monetary aggregates or money stock measures. Various monetary and liquidity aggregates compiled in India are as follows

Reserve Money (M₀ )= Currency in Circulation + Bankers’ Deposits with the RBI + Other Deposits with the RBI
M₁= Currency with the Public + Demand Deposits with the Banking System + Other Deposits with the RBI
M₂ – M₁+ Post Office Savings Banks
M₃ =M₁+ Time Deposits with the^Banking System
M₄ = M₃+ Office Savings of Banks (Excluding National Savings Certificates)

The working group under the chairmanship of Dr YB Reddy then Deputy Government of RBI (Now Former Governor of RBI) has suggested four new monetary measures (M_0,M_1, M₂, M_3.). Here, M₀ is reserve money which is most liquid measure of money supply. M₁termed as narrow money and M₃ as broad money. The decreasing order of liquidity of these monetary aggregates is M₀ > M₁> M₂> M₃. The decline in liquidity indicates the shifting of ‘medium of exchange to store of value’. These monetary measures are arranged in decreasing order of liquidity, with M₁, being the most liquid.

The Indian Currency System
The present monetary system of India is based on on in convertible paper currency and is managed by the Reserv e Bank of India. The present currency system is based on minimum reserve system of note issue. It was adopted in 1957. Under the mini- mum reserve system, RBI has to keep a minimum reserve of ₹ 200 crore comprising of gold coins and foreign currencies. Out of the total ₹ 200 crores, ₹ 115 crore should be in form of gold.

Mints
Coins are minted by the Government of India. RBI is the agent of government for distribution, issue and handling of coins. Four mints are operation at Mumbai, Noida (UP), Kolkata and Hyderabad.

Tit- Bits

The symbol of Indian rupee (₹) came into use on 15th July, 2010.
The new symbol was designed by D Udaya Kumar. This symbol is an amalgamation of Devenagri ‘Ra’ and the Roman ‘R’ without the stem.

Languages in Currency

PMO has directed the coins and currency division of RBI to take appropriate steps to include Maithili as well as the remaining four languages i.e. Manipuri, Santhali, Dogri and Bodo, on the rupee note. Out of 22 languages havings been accorded official languages status as per eight schedule of the constitution of India, only 17 find a place on the Indian currency till now.

Features of New ₹2000 Notes
The new currency note of magenta colour 2000 rupees will have an image of the Mangalyaan celebrating success of India’s Mars mission. Also, it will have the following identification marks. The size of new note is 66mm x 166mm. Obverse:

See through register with denominational numeral 2000 can be seen when the note is held against light.
Portrait of Mahatma Gandhi in the centre. Micro letters ‘RBI’ and ‘2000’.
Colour shift windowed security thread with inscriptions ‘Bharat’, RBI and 2000. Colour of the thread changes from green to blue when the note is tited
Number panel with numerals growing from small to big on the top left side and bottom right side.
Ashoka Pillar emblem on the right.
Raised printing of Mahatma Gandhi portrait, Ashoka Pillar emblem, based and identification mark.
Horizontal rectangle with ? 2000 in raised print on the right.
Seven angular bleed lines on left and right side in raised print.
Swachh Bharat logo with slogan.

Features of New ₹ 500 Notes
The size of new of stone grey colour note of ₹ 500 is 63mm x 150mm. Obverse:

Latent image of the denomination numeral. Denomination numeral in Devanagari.
Orientation and relative position of Mahatma Gandhi portrait changed.
Number panel with numerals growing from small to big on the top left side and bottom right side.
Denomination in numerals with rupee symbol in colour changing ink (green to blue) on bottom right.
Ashoka pillar emblem on the right.
Raised printing of Mahatma Gandhi portrait, Ashok pillar emblem, based and identification mark. Five bleed lines on left and right in raised print.
Year of printing of the note on left. Swachh Bharat logo with slogon. Red Fort-an image of Indian heritage site with Indian flag.

Printing of Securities and Minting in India

Relaunched ₹ 1 Note
Alter 20 yrs, RBI relaunched ₹ 1 note in Mar, 2015. In Nov, 1994, printing of ₹ 1 note was stopped ) mainly due to higher cost and for freeing capacity to print currency notes of higher denomination. Printing of ₹ 2 and ₹ 5 notes too were discontinued in 1995.

Cheque and Draft Services of Bank

Cheque
It is a bill of exchange dramon on a specified samker expressed to be payable on demand. From 1st April, 2012 cheques, drafts, pay orders and banker’s cheques will be valid for only 3 months.

Drawer Person who has an account in bank and who draws a cheque for making payment.
Drawee A drawee is a person by whom the cheque is drawn.
Payee A payee is the person to whom the amount stated in the cheque is payable.

Types of Cheques

Order Cheque: A cheque payable to particular person or his order is called an order cheque.
Bearer Cheque: A cheque which is payable to a person, whosoever bears, is called a bearer cheque.
Blank Cheque: A cheque on which the drawer puts his signature and leaves all other columns blank, is called a blank cheque.
Stale Cheque: The cheque which is more than 3 months old is a stale cheque.
Multilated Cheque: If a cheque is torn into two or more pieces, it is termed as multilated cheque.
Post-Dated Cheque: If a cheque bears a date later than the date of issue, it is termed as post-dated cheque.
Open Cheque: A cheque which has not been crossed, is called an open cheque. Even if a cheque is crossed and subsequently the drawer has cancelled the crossing at the request of the payee and affixes his full signature with words ‘crossing cancelled pay cash’, it becomes an open cheque.
Crossed Cheque: A cheque which carries too parallel transverse lines across the face of cheque with/without words ‘and co’, is said to be crossed.
Account Payee Cheque: Account Payee cheque simply means drawing two parallel lines on the left corner of the cheque and write the words ‘Account Payee’ or ‘A/c payee’ between those lines.
Gift Cheque: Gift cheques are used for offering presentations on occasions like birthday, weddings and such other situations. It is available in various denominations.
Travellers’ Cheque: It is an instrument issued by a bank for remittance of money from one place to another.
MICR Cheques: The Reserve Bank of India (RBI) has introduced mechanised cheque processing system using MICR (Magnetic Ink Character Recognition) technology initially in the four metropolitan cities of Bombay, Calcutta, Madras and New Delhi in 1987. The MICR code has nine digits.
The first three digits in the MICR code represent the city code that is the city in which the bank branch is located. The next three digits stand for the bank code while code three digits represent the bank branch code.

Tit-Bits

Now, in our country the cheque is valid for payment till 3 months only from the date of CD issuance.
The most important documents for opening a bank account is the domicile certificate.
Piggy Bank’ which is popular among the poor t or the children is a form of small saving bank.

Bank Draft
It is a bill of exchange in which a bank orders its branch or another bank specified therein, as the case may be, to repay a specified sum of money to a specified person or to his order. Usually, banks charge a standard rate of service/issue charges on these drafts.

Difference between a Cheque and a Demand Draft
A cheque is issued by an individual, whereas a demand draft is issued by a bank. A cheque is drawn by an account holder of a bank whereas a draft is drawn by one branch of a bank on another i branch of the same bank. A cheque can be made payable either to a bearer or order. But a demand draft is always payable to order of certain person.

Question Bank

1. The banking regulation act, 1949 provides

A frame work of regulation
Supervision of Commercial banking activities
1 and 2
Supervision of private sector bond
None of the above

2. Drawing, accepting, making or issuing of any promissory note, hundi or bill of exchange expressed to be payable to bearer on demand by a person other than the Reserve Bank of India or the Central Government is prohibited under

Banking Regulation Act, 1949
Section 31 (1) of the Reserve Bank of India Act, 1934
Negotiable Instruments Act, 1881
Indian Contract Act, 1872
None of the above

3. In terms of Section 24 of the Reserve Bank of India Act, 1934, the Reserve Bank of India may issue bank notes for the maximum denomination of

₹ 500
₹ 5000
₹ 10000
₹ 1000
None of these

4. Which of the following is the sole authority for issue of currency in India?

Government of India
Reserve Bank of India
Controller of Currency
All of the above
None of the above

5. The minting of Indian comes under the act coin

Coinage Act, 1906
Reserve Bank of India Act, 1934
Banking Regulation Act, 1949
Currency Act, 1902
None of the above

6. One rupee notes and coins are issued by

Reserve Bank of India
State Bank of India on behalf of Government of India
Government of India
Finance Minister of Central Government
None of the above

7. Which of the following instruments of credit control adopted by Reserve Bank of India does not fall within ‘general’ or ‘quantitative’ methods of credit control?

Stipulation of certain minimum margin in respect of advance against specified commodities
Open market operations
Bank rate
Variable reserve requirements
None of the above

8. The opening of branches by banks is governed by the provisions of

Section 23 of the Banking Regulation Act,
1949
Section 24 of Reserve Bank of India Act, 1934
Section 131 of the Negotiable Instruments Act, 1881
Section 45 of Bank Nationalisation Act, 1969
None of the above

9. Which of the following fall under the qualitative methods of credit control adopted by Reserve Bank of India ?

Selective Credit Control
Credit Authorisation Scheme
Moral Suasion
All of the above
None of the above

10. The term ‘moral suasion’ refers to

the moral duty of a borrower to deal with only one bank
the banker’s duty of secrecy as regards the affairs and accounts of his customers
the advice given by Reserve Bank to banks/financial institutions in the matter of their lending land other operations with the objective that they might implement or follow it
All of the above
None of the above

11. Bank rate means

the rate of interest charged by commercial banks on advances
the rate at which commercial banks discount bills of exchange for their clients
the rate of interest allowed by banks on the deposits
the standard rate at which the Reserve Bank of India is prepared to buy or rediscount bills of exchange other commercial paper are eligible for purchase under the Reserve Bank of India Act, 1934.
None of the above

12. The monetary authority in India, viz Reserve Bank of India, is bound to maintain a reserve against the notes issued, whatever may be the amount. This system is called as

minimum reserve system
proportional reserve system
maximum fiduciary issue system
simple deposit system
None of the above

13. Banks and other financial institutions in India are required to maintain a certain amount of liquid assets like cash, precious metals and other short term securities as a reserve all the time in banking world, this is known as

CRR
Fixed asset
SLR
PLR
None of these

14. The term ‘Currency of India’ refers to

one rupee notes and coins
bank notes issued by Reserve Bank of India viz., ₹ 2, ₹ 5, ₹ 10, ₹ 20, ₹ 50, ₹ 100 and for other higher denominations
one rupee notes and coins and bank notes issued by Reserve Bank of India
one rupee notes only
None of the above

15. The ratio of the Cash Reserves that the banks are required to keep with the RBI is known as

Liquidity Ratio
SLR
CRR
Net Demand and Time Liability
None of the above

16. The term ‘Ways and Means’ advances refers to

the advances allowed under DRI Scheme by commercial banks
the advances allowed by commercial banks under Twenty Point Economic Programme
the temporary advances made to the government by its bankers to bridge the interval between expenditure and the flow of receipts of revenues
All of the above
None of the above

17. The rate of interest banks charge its main/major and prime customers is popularly called as

Risk Premium
Prime Lending Rate
Repo Rate
Reverse Repo Rate
Cost of fund

18. The term ‘BSR’ refers to

Bank’s Selling Rate
Basic Statistical Returns
Annual returns submitted by banks to RBI in respect of priority sector advances
Quarterly statement of advances to agriculture
None of the above

19. The note-issue system in India is based on

Gold Deposit System
Minimum Reserve System
Proportional Reserve System
Simple Deposit System
None of the above

20. The Indian rupee is a

token coin
standard token coin
standard coin
gold coin
None of the above

21. The currency notes are issued by the Reserve Bank of India under the signature of

Executive Director
Deputy Governor
Governor
Secretary
None of the above

22. Which of the following training establishment is not run by Reserve Bank of India?

Bankers Training College, Bombay
College of Agricultural Banking, Pune
NIBM
All of the above
None of the above

23. In periods of depression when the Reserve Bank desires to encourage the banking system to create more credit, it

reduces the bank rate
raises the bank rate
permits the bank rate to be decided by market forces
All of the above
None of the above

24. For the performance of its duties as the regulator of credit, the Reserve Bank of India possesses the usual instruments of general credit control, viz.

bank rate
open market operation
the power to vary the reserve requirement of banks
All of the above
None of the above

25. When the Reserve Bank desires to restrict expansion of credit, it

raises the bank rate
reduces the bank rate
freezes the bank rate
None of these
All of these

26. The currency notes issued by RBI have a cent per cent cover in

approved assets
gold
foreign exchange
trustee securities
None of these

27. Which of the following do not fall within the functions of the Reserve Bank of India?

Regulation of currency
Control of credit
Banker to the government, banker’s bank and lender of the last resort
Accepting deposits and making loans and advances to public
None of the above

28. The approved assets against which currency notes are issued by RBI comprise of

gold coin and bullion and rupee coin
foreign securities and Government of India rupee securities of any maturity
bills of exchange and promissory notes payable in India which are eligible for purchase by RBI
All of the above
None of the above

29. The Public Debt Office of the Reserve Bank of India

is a central depository for all types of Government securities except Treasury Bills
attends to the function of note issue by the Reserve Bank of India
is responsible for maintaining external value of rupee
controls balance of payment position of the Government of India
None of the above

30. RBI has directed banks that the exercise of verification of asset classification and income recognition should be done as part of the audit work by the branch and statutory Auditors effective from the year ending

31st Mar, 1993
31st Mar, 1994
31st Mar, 1995
31st Mar, 1996
None of the above

31. Which of the following is not a function of the RBI?

Maintaining Forex
Deciding Bank Rate, CRR and SLR from time to time.
Opening Savings Accounts for general public
Prescribing the Capital Adequancy Ratio
Currency Management

32. RBI’s open market operation transactions are carried out with a view to regulate

liquidity in the economy
prices of essential commodities conflation
borrowing power of the banks
All of the above
None of the above

33. The instance of RBI monetary policy is

inflation control with adequate liquidity for growth
improving credit quality of the banks
strengthening credit delivery mechanism
supporting investment demand in the economy
All of the above

34. What does the letter ‘L’ denote in the term ‘LAF as referred every now and then in relation to monetary policy of the RBI?

Liquidity
Liability
Leveraged
Longitudinal
Linear

35. Which of the following is not a measure adopted by the Government or RBI to control inflation?

Monetary policy
Fiscal policy
Public distribution system
Price control
Financial inclusion

36. Whenever RBI does some Open Market Operation transactions, actually it wishes to regulate which of the following?

Inflation only
Liquidity in economy
Borrowing powers of the banks
Flow of foreign direct investments
None of the above

37. Interest rates on which of the following deposit schemes is fixed by the Reserve Bank of India?

Fixed deposits above 5 yr maturity
Recurring deposits
Savings bank
Flexi Deposit Scheme
None of the above

38. Under Section 19 of the Reserve Bank of India Act, 1934, the RBI has been prohibited from

making loans or advances
drawing or accepting bills payable
allowing interest on deposits or current accounts
All of the above
None of the above

39. RBI has recently deregulated the rates of interest to be provided by various banks to their depositors/customers with effect from 25th October, on their accounts.

Time deposit
Saving bank
Loan
Fixed deposit
Current

40. Which of the following functions are not being performed by the Reserve Bank of India?

Regulation of banks in India
Regulation of foreign direct investment in India
Foreign currency management in India
Control and supervision of money supply
Currency management in India

41. Which of the following is not a function of the Reserve Bank of India?

Fiscal policy functions
Exchange control functions
Insurance, exchange and destruction of currency notes
Monetary authority functions
Supervisory and control function

42. The Reserve Bank of India has directed all the banks to ensure that the names of their customers, individuals or corporate, do not appear in any list published by the Security Council Committee. This act/directive of the RBI is to ensure which of the following?

To ensure that the bank loans/advances taken by the individuals/organisations are used only in those activities for which they are taken
To ensure that money deposited in the bank has not come from unknown and unauthorised sources
To ensure that no one visits a f6reign nation for any illegal activity by purchasing foreign currency from a bank
To ensure that Indians do not go to a nation where they are being targeted for racial discrimination
None of the above

43. As per newspaper reports, inflation in India and China was at a very high level. In such a situation the Central Banks of these countries are required to follow

a more liberal credit policy
a very tight credit policy
create an atmosphere of easy liquidity in the market
raise the limits of personal and corporate income taxes
None of the above

44. As we all know, banks in India are required to maintain a portion of their demand and time liabilities with the Reserve Bank of India. This portion is called

statutory liquidity ratio
cash reserve ratio
bank deposit
reverse repo
government securities

45. Reserve Bank of India is the lender of the last resort to scheduled commercial banks because

the parties can approach RBI when their limits are exhausted
they are not able to get loans from other banks
RBI meets directly or indirectly all their reasonable demands for financial accommodation subject to certain terms and conditions which constitute its discount rate policy
All of the above
None of the above

46. Banks without the prior approval of the RBI, cannot

own a new place of business in India or abroad
shift within the same centres (city/town/village) of the existing place of business
shift their sole rural branch outside the centre/village as such shifting would render the centre unbanded
All of the above
None of the above

47. The interest rate at which the RBI lends to commercial banks in the short term to maintain liquidity is known as

interest rate
repo rate
reverse repo rate
bank rate
None of the above

48. Who is the final authority for deciding the design, form and material of bank notes?

Central Government
Reserve Bank of India
Indian Banks Association
Note Issuing Authority of India
None of the above

49. The bank rate is

free to fluctuate according to the forces of demand and supply
set by the RBI
set by the RBI is directed by the Union Ministry of Finance
set by the RBI as advised by the Indian Banks Association
set by the Government of India on the recommendation of the Planning Commission

50. As per the reports in various newspapers many private companies are trying to obtain the licences to launch a banking company in India. Which of the following organisations/agencies issue the licence for the same?

Securities and Exchange Board of India (SEBI)
Indian Institute of Banking and Finance (IIBF)
Indian Banks’ Association
Registrar of Companies
None of the above

51. Reverse Repo is a tool used by RBI to

inject liquidity
absorb liquidity
increase the liquidity with banking system
to keep the liquidity at one level
None of the above

52. What are the co-operative banks at the village level known as?

Central co-operative banks
Primary agricultural co-operative societies
Village co-operative banks
State co-operative banks
None of the above

53. Which of the following would result in a fall in asset prices?

Low liquidity in the economy
1 Iigh liquidity in the economy
RBI increasing the Reserve Repo Rates
RBI allowing more banks to pay
None of the above

54. What is Repo Rate?

It is a rate at which RBI sell government securities to banks
It is a rate at which RBI buys government securities from banks
It is a rate at which RBI allows small loans in the market
It is a rate which is offered by banks to their most valued customers or prime customers
None of the above

55. A customer wishes to purchase some US dollars in India. He/ she should go to

Public Debt Division of the RBI
American Express Bank
RBI or any branch of a bank which is authorised for such business
Ministry of Foreign Affairs
None of the above

56. The names of which of the following rates/ ratios cannot be seen in financial newspapers?

Bank Rate
Repo Rate
Statutory Liquidity Ratio
Cash Reserve Ratio
Pulse Rate

57. Prior approval (as also a licence) of RBI is required for opening

personal banking branches
merchant banking branches
asset recovery branches
All of the above
None of the above

58. For the first time, in which year Basel Committee came up with Capital Accords for banks?

1985
1988
1990
1992
1998

59. Which among the following is not a part of Tier-1 capital?

Issued Capital
Fully Paid-up Capital
Disclosed reserves
Undisclosed reserves
None of the above

60. In 1988, the BCBS in Basel, Switzerland, published a set of minimum capital requirements for banks. What is BCBS?

Basel Committee on Banking Supervision
Basel Council on Banking Supervision
Basel Committee on Banking System
Basel Council on Banking System
Basel Council on Supervision on Bad Assets

61. Under Basel HI accord, Indian’s banks have to maintain Tier-1 capital (equity and reserves) at how much………. per cent of risk weighted assets (RWA).

8%
7%
9%
5%
None of these

62. According to the recent RBI financial stability report, how much additional capital does an Indian bank will require to comply with Basel HI norms?

₹ 3 lakh crore
₹ 1.75 lakh crore
₹ 5 lakh crore
₹ 4.5 lakh crore
None of these

63. Where is headquarter of Basel Committee on Banking Supervision (BCBS)?

Rome
Switzerland
Belgium
Washington DC
None of the above

64. In India, the system of decimal coinage was introduced on

15th Aug, 1947
26th Jan, 1950
1st April, 1957
All of the above
None of the above

65. Which of the following is/are,the composition of Liquidity aggregate-2 (L2) other than Liquidity aggregate-1 (LI) in the Indian Monetary System?

Term deposits with Term Lending Institutions and Refinancing Institutions
Term Borrowing by Refinancing Institutions
Certificates of Deposit issued by Refinancing Institutions
All of the above
None of the above

66. Consider the following.
I. New Broad Money (NM₃)
II. New Narrow Money
III. All Deposits with the Post Office Savings Banks
IV. National Savings Certificates
Which of the components given above are correct included in the Liquidity Aggregates (LI) in the Indian economy?

II and IV
II and III
I and III
III and IV
All of the above

67. Consider the following measures.
I. Repo Rate
II. Cash Reserve Requirement
III. Reverse Repo Rate
Which of the measures given above is/are major instruments used in the Liquidity Adjustment Facility (LAF)?

I and II
I and III
II and III
All of these
None of these

68. Which of the following are the instruments of Credit Control in the hands of the RBI?
I. Lowering or raising the discount and interest rates.
II. Raising the minimum support price of the major agro products.
III. Lowering or raising the minimum cash reserves maintained by the commercial banks.
Select the correct answer using the codes given below

Only I
Only II
Only III
Both I and III
Both II and III

69. Which of the following are decided by the Reserve Bank of India?
I. Deposit rates
II. Base Rate
III. Prime Lending Rate
Select the correct answer using the codes given below

Only I
Only II
Only III
II and III
None of these

70. Many times we read a term ‘Hot Money’ in newspapers. What is/are the characteristics of Hot Money?
I. The term is used for fresh currency notes issued by the RBI.
II. It is the fund which flows in the market to take advantage of high interest rates.
III. It is the fund which is thrown in the market to create imbalance in the stock markets.
Select the correct answer using the codes given below

Only I
Only II
Only III
All of these
None of these

71. As per reports in the newspapers the Indian Rupee is appreciating these days. What does it really mean?
I. The value of the Rupee has gone up. It is now 110 paise and not 100 paise.
II. The exchange rate of Rupee has gone up.
III. Now we can purchase more in one Rupee. Which was not possible earlier?

Only I
Only II
Only III
Both I and II
None of the above

72. Rupee coins are the legal tender in India under the provisions of [IBPS PO 2011]

Reserve Bank of India Act, 1934
Negotiable Instruments Act, 1881
Banking Regulation Act, 1949
Indian Coinage Act, 1906
None of the above

73. Bank rate policy, open market operations, variable reserve requirements and statutory liquidity requirements employed by Reserve Bank as measures of credit control are classified as [IBPS PO 2011]

quantitative methods
qualitative methods
monetary methods
All of the above
None of the above

74. Consider the following [Corporation Bank 2011]
I. Bank Rate Policy
II. Open Market Operations
III. Devaluation of Rupee
Which of the above are called fiscal measures?

Only II
Both I and II
Both I and III
Only III
None of these

75. The Reserve Bank of India does not decide the [RBI Assistant 2012]

Rate of Repo and Reverse Repo
Marginal Standing Facility Rates
Bank Rate
Rate of Dearness Allowance to Government Employees
Statutory Liquidity Ratio

76. Coin of which of the following denominations is called Small Coin? [RBI Assistant 2012]

₹1
₹2
₹5
50 paise
₹ 10

77. A bank’s ‘fixed deposit’ is also referred to as a [IBPS PO 2013]

term deposit
savings bank deposit
current deposit
demand deposit
home savings deposit

78. With effect from July 1, 2012, for calculation of lending rates, the Reserve Bank of India has advised banks to switch over to the

MSF Rate System [IBPS PO 2013]
Reverse Repo Rate System
Bank Rate System
Repo Rate System
Base Rate System

79. Interest on savings deposit now-a-days is [SBI PO 2013]

fixed by RBI
fixed by the respective banks
fixed by the depositors
fixed as per the contract between bank and the Consumer Court
not paid by the bank

80. Interest below which a bank is not expected lend to customers is known as…………… [SBI PO 2013]

deposit rate
base rate
prime lending rate
bank rate
discount rate

81. Banks in India are required to maintain a portion of their demand and time liabilities with the Reserve Bank of India. This portion is called [SBI PO 2013]

statutory liquidity ratio
cash reserve ratio
bank deposit
reverse repo
government securities

82. The amount specified as the Cash Reserve Ratio (CRR) is held in cash and cash equivalents and is stored in bank vaults or parked with [SBI PO 2014]

Small Industries Development Bank of India (SIDBI)
Government of India (Gol)
Reserve Bank of India (RBI)
State Bank of India (SBI)
Rural Infrastructure Development Fund (RIDF)

83. The RBI policy rate which is purely an indicative rate used by the Reserve Bank of India to signal long term outlook on interest rates is [SBI PO 2014]

bank rate
repo rate
call money rate
notice money rate
reverse repo rate

84. The government of India has undertaken programme of recapitalisation of Public Sector Banks to help them enhance business growth and [SBI PO 2014]

capital adequacy norms
ratio of non-performing assets
per employee business ratio
CASA ratio
credit or deposit ratio

85. The Reserve Bank of India has been critical of home loan products with comparatively low interest rates in the initial years but higher in the subsequent years which are popularly known as the [SBI PO 2014]

teaser rates
cheater rates
twister rates
cheaper rates
trickster rates

86. Recently, India has decided to introduce plastic currenc y notes. A number of other countries are already using plastic notes, but the pioneer in this field, is [SBI Clerk 2015]

Sweden
England
France
United States of America
Australia

87. Which of the following is one of the main functions of the Reserve Bank of India? [SBI Clerk 2015]

Regulation of the stock markets
Regulation of life insurance
Regulation of general insurance
Regulation of mutual funds in India
Banker’s bank

88. One rupee note bears the signature of

President of India [SBI Clerk 2015]
Vice-President of India
Finance Secretary
Finance Minister
Commerce Minister

89. A cheque bearing the date earlier than the date of submission to the bank, is known as [SBI Clerk 2014]

Bearer Cheque
State Cheque
Crossed Cheque
Post Dated Cheque
Anti Dated Cheque

90. Liquidity is injected by the RBI in the economy through which of the following mechanisms? [SBI Clerk 2014]

Change in Bank Rate
Repo
Increase in SLR
Through Liquidity Adjustment Facility
Increase in CRR

91. Which of the following instruments of credit control adopted by the Reserve Bank of India (RBI) does not fall within ‘general’ or ‘quantitative’ methods of credit control? [IBPS Clerk 2015]

Bank rate
Open market operations
Stipulation of certain minimum margin in respect of advance against specified commodities
Variable reserve requirements
None of the above

92. In terms of Section-5 (1) (e) of the Banking Regulation Act 1949, a ‘banking company’ means any company which [IBPS Clerk 2015]

transacts the business of banking in India
undertakes lending of money
accepts deposits from public and invests the same as trade and industry
accepts deposits from public
All of the above

93. Which of the following extreme measures may be resorted to by the Reserve Bank of India (RBI), in order to safeguard the interest of the depositing public when the affairs of a bank are observed to be beyond redemption? [IBPS Clerk 2015]

Refusal of a licence or cancellation of an existing licence
Merge the bank with any public sector bank
Applying to the Central government for an order of moratorium and thereafter reconstructing or amalgamating the bank with another bank
All of the above
None of the above

94. For which of the following, the Reserve Bank of India has stipulated the maximum capital adequacy requirement? [IBPS Clerk 2015]

Private Sector Banks
Banks that undertake insurance business
Local Area Banks
Scheduled Commercial Banks
None of the above

95. ………. heads and conducts the affairs of RBI. [IBPS Clerk 2015]

Central Board
Local Board
Regional Board
All of the above
None of the above

96. The RBI provides……. for meeting day-to-day receipt and expenditure mismatch to both Central and State government. [IBPS Clerk 2015]

treasury bills
ways and means advance
date and securities
All of the above
None of the above

97. The RBI known as lender of last resort because [IBPS Clerk 2015]

it has to meet the credit need of citizens to whom no one else is willing to lend
banks lend to go to RBI as a last resort
it comes to help banks in times of crisis
All of the above
None of the above

98. An increase in CRR by RBI leads to [IBPS Clerk 2015]

decrease in deposit
increase in deposit
increase in lendable resources
decrease in lendable resources
None of the above

99. CRR funds are kept by the banks in [IBPS Clerk 2015]

cash in hand at branches
balance with other banks
balance in a special account with RBI
funds in the currency chest
None of the above

100. SLR is maintained as a percentage of [IBPS Clerk 2015]

time liabilities
demand liabilities
1 and 2
gross time and demand liabilities
net demand and time liabilities

101. ………… intervenes in markets to maintain the external value of the Indian rupee. [IBPS Clerk 2015]

Exporters
Importers
RBI
SBI
None of the above

102. The ratio of deposits to loans of a bank is known as [SBI Clerk 2015]

NPA coverage ratio
Return on asset ratio
Asset coverage ratio
CD ratio
Other than those given as options

103. In a bank’s balance sheet, which of the following is an asset? [SBI Clerk 2015]

Its paid up capital
Its saving deposits
Its investment in government securities
Its accumulated reserve funds
Its current deposits

104. Which of the following is the minimum lending rate which the banks can charge their customers? [RBI Grade B 2015]

Reverse repo rate
Other than the those given as options
Bank rate
Base rate
Repo rate

105. Security Printing and Minting Corporation of India Limited (SPMCIL) has four mints in India. These four government mints are situated in [RBI Grade B 2015]

Mumbai, Dewas, Hoshangabad and Mysore
Mumbai, Nasik, Mysore and Ghaziabad
Mumbai,’New Delhi, Nasik and Gurgaon
Mumbai, Pune, Nasik and Hoshangabad
Mumbai, Kolkata, Hyderabad and Noida

106. The Financial Stability Report is issued on a half-yearly basis by [RBI Grade B 2015]

Reserve Bank of India
World Economic Forum
International Monetary Fund
NITI Aayog
World Bank

107. The ratio of deposits in current and savings account to total deposits of a bank, is known as [RBI Grade B 2015]

Capital Adequacy Ratio
NPA ratio
NIM ratio
CD ratio
CASA ratio

108. The ‘Bank rate’ is periodically announced by the [RBI Grade B 2015]

Indian Banks Association (IBA)
State Bank of India (SBI)
Reserve Bank of India (RBI)
Ministry of Finance
Board of the respective banks

Answer Key

Banking Awareness Study Material – Money Market And Capital Market

April 3, 2018 by Anthony Leave a Comment

Banking Awareness Study Material – Money Market And Capital Market

https://www.youtube.com/watch?v=Ni2qKXMzCco

Banking Awareness Study Material Computer Awareness Marketing Aptitude

Financial Market

Financial Market is a transfer process between lender and debtor through which the transfer of financial fund can be done easily. It provides safe exchange of financial assets. It provides liquidity to investors in the sale of financial assets and also ensures the minimum cost of exchange and related information.

Components of Indian Financial Market
Components of Indian financial market are as follows

Money Market It is used by a wide array of participants from a company raising money by selling commercial paper into the market to an investor purchasing CDs as a safe place to park money in the short term.
Capital Market It is a market for buying and selling equity and debt instruments. Capital market channel savings and investment among suppliers of capital such as retail investors and institutional investors and users of capital like businesses,government and individuals.
Commodity Market It is a market that trades in primary rather than manufactured products. Soft commodities are agricultural products such as wheat, coffee and sugar. Hard commodities are mined such as gold, rubber and oil.
Derivatives Market It is the financial market for derivatives, financial instruments like future contracts or options, which are derived from other forms of assets.
Insurance Market Objective of this market is the equitable transfer of the risk of a loss from one entity to another. It is a form of risk management primarily used to hedge against the risk of a contingent uncertain loss.
Foreign Exchange Market The Foreign Exchange Market (Forex, FX or currency market) is a global decentralised market for the trading of currencies. The main participants in this market are the larger international banks.

Money Market
The cluster of financial institutions that deal in short term securities and loans, gold and foreig exchange are termed as money market.

The money market is a key component of the financial system, as it is the function of monetary operations conducted by the Central Bank in its pursuit of Monetary policy objectives. It is a market for short term funds with maturity ranging from overnight to one year and includes financial instruments that are deemed to be close substitutes of money.

Functions of Money Market
The money market performs three broad functions which are as follows

It provides an equilibrating mechanism for demand and supply of short term funds.
It enables borrowers and lenders of short term funds to fulfill their borrowing and investment requirements at an efficient market clearing price.
It provides an avenue for Central Bank intervention in influencing both quantum and cost of liquidity in the financial system, thereby transmitting Monetary Policy impulses to the real economy.

Types of Money Market
In Indian money market, Reserve Bank of India plays the central role, as it regulates and controls the money market. Indian money market is mainly divided into two parts

Organised Sector It comprises of all the public sector banks and foreign exchange banks except Reserve Bank of India.
Unorganised Sector It comprises of domestic bankers and moneylenders. They do not have been given any financial validity or certification by any financial institution. They are commonly found in underdeveloped areas, e.g. moneylenders landlord, broker, committee, etc.

Sub-Markets and Instruments

A specialised sub-division of a market is known as sub-market. In Indian money market, sub-market is an inevitable part. It includes call money market, bill market, etc.

Call Money Market
The call/notice money market forms an important segment of the Indian money market. It is an amount borrowed or lent on demand for a very short period.If the period is greater than 1 day and upto 14 days, it is called the notice money otherwise, the amount is known as call money.

No collateral security is needed to cover these transactions. This is a completely inter bank market. Interest rates are market determined.

In view of the short tenure of these transactions, both borrowers and lenders are required to have current accounts with Reserve Bank of India (RBI).

Bill Market
The underlying purpose of developing the bill market was to enable banks and other financial institutions to invest their surplus funds profitably by selecting appropriate maturities.

Some types of bill market are as follows

Commercial Bill It is the market that deals in commercial bills. Commercial bills of exchange are negotiable instruments drawn by the seller or drawer of the goods of the buyer or drawee of the goods for the value of the goods delivered. These bills are called trade bills. These trade bills sure called commercial bills when they are accepted by commercial banks. Duration of commercial bill is 1 to 14 days only.
Treasury Bills (T-Bills) It is an instrument for short term borrowing by the government. The bills are issued by tender to the money market and to government departments through tap issues. Tenders are invited every \freek from bankers, discount houses and brokers.On the one hand, T-bills provide the government with a highly flexible and relatively cheap means of borrowing money to meet its fluctuating needs for cash and on the other, the bills provide a sound security for dealings in the money market. The Reserve Bank of India, being the banker to the government, issues treasury bills at a discount.

There are four types of treasury bills

14 days T-bill
91 days T-bill
182 days T-bill
364 days T-bill

The Reserve Bank now auctions 91 days T-bills on a weekly basis and 182 days T-bills (re-introduced in April, 2005) and 364 days T-bills on a fortnightly basis, on behalf of the Central Government. The Reserve Bank has been paying special attention to this market segment.

Commercial Paper (CP): Commercial Paper is issued in the form of a promissory note, sold directly by the issuer to investors or else placed by the borrowers through agents such as merchant banks and security houses. CP can be issued in denominations of ? 5 lakh or multiples thereof.

These papers have a maturity of minimum 7 days and maximum of upto 1 year from the date of issue. These are negotiable and transferable by endorsement.

Promissory Note (PNs): It is a legal document between a lender and a borrower, whereby the latter agrees to certain conditions for the repayment of the sum of money borrowed. When one borrows from a commercial bank, he signs a promissory note.

Particular forms of promissory notes, known as commercial paper, can be bought and sold. They are usually issued by large corporations, but in some countries. Promissory notes are a common form of small business finance.

Certificate of Deposits (CDs): It is a negotiable claim issued by a bank in return for a term deposit. Certificates of Deposits (CDs) are securities that are purchased for less than their face value, which is the bank’s promise to repay the deposit and thus, offer a yield to maturity. Certificate of Deposits were first issued in New York in the 1960s and thus, denominated in dollars.

Sterling Certificate of Deposits followed in 1968. Maturity period of Certificate of Deposits is from 7 months to 1 year. Certificate of Deposits is issued for ₹ 1 lakh or its multiples.

Unorganised Money Market
The sector consists of unregulated non-bank financial intermediaries such as moneylender’s chit funds, nidhis, etc. Chit funds are savings institutions. They are of various types and do not have any standardised form. Chit funds have regular members, who make periodic contributions. Organised chit funds are regulated by the Registrar of Chit Funds and the relevant legislation in this regard is the Chit Funds Act, 1982. There is however, regulatory confusion since Collective Investment Schemes (CIS) cure to be registered and regulated by SEBI. Many chit funds take advantage of the regulatory loopholes.

Money in Financial Market
Money is an object or record that is generally accepted as payment for goods and services and repayment of debts in a given socio-economic context of country. Any kind of object or secure variable record that fulfills these functions can be considered as money.

Adjacent Money: It is not exact money, but near to money. Because it’s nature of liquidity is more in comparison to others like bond, government debenture, etc.

Different Types of Money

Three main types (forms) of money in a modern economy metallic money, paper money and credit money. Economists, however, further classify money into many other forms.

The important types of money are explained below

Metallic Money: Money made up of any metal is called’metallic money. It refers to coins that are made up of various metals like gold, silver, nickel, copper, etc. The right of minting coins, is the monopoly of the state.

Metallic money is further classified into

Standard Money: Standard money or full bodied money is that money whose face value (value as money) is equal to the intrinsic value (value as commodity). Standard money/coins are generally made up of gold and silver.
Token Money: Token money is that money whose face value (value as money) is greater than its intrinsic value (value as commodity). Token money/coins are generally made up of cheaper metals like copper, nickel etc; (Indian ₹1 coin is token money).
Subsidiary money: The purpose of subsidiary money is to help the token money. All coins from 50 paise to ₹10 is the subsidiary money. It is legal money.

Paper Money
Money made up of paper is called paper money. Paper money consists of currency notes issued by the government or the Central Bank of a country.

Paper money is of following types

Representative Paper Money The paper money which is fully backed by gold and silver reserves is called representative paper money.
Convertible Paper Money It is that paper money which is convertible into standard coins.
Inconvertible Paper Money It is that paper money which is not convertible into standard coins or valuable metals.
Fiat Money Paper money which circulates on the authority (i.e. fiat) of the government is fiat money. Fiat money is created and issued by the state. It is only a variety of inconvertible paper money.

Acceptable Money
On the basis of general acceptability, money can be categorised into legal tender money and non-legal tender money (optional money).

Legal Tender Money
It refers to that money which the state and the people accept as means of payment in discharge of debts. Legal tender money is enforced by law. No one can refuse to accept it as a means of payment.

Legal tender money may be of two types

Limited Legal Tender Money It is accepted only upto a certain limit, e.g. In India, the small coins of 50 paise is legal tender money only upto a sum of₹ 10.
Unlimited Legal Tender Money It is that money which has to be accepted as a medium of payment upto any amount. In India, 50 paise coins, ₹1, ₹ 2,₹5 coins and currency notes of all denominations are unlimited legal tender money.

Non-Legal Tender Money: It is also known as optional money. It refers to that money which may or may not be accepted as a means of payment. Optional money has no legal sanction. No one can be forced to accept optional money. Different credit instruments like cheques, bankdrafts, bill of exchange, treasury bills, insurance policies, bonds etc; are examples of optional money.

Demonetization: Demonetization is the act of Banning/taking back of a currency unit of its status as legal tender. Demonetization is necessary whenever there is a change of national currency. The old unit of currency must be retired and replaced with a new currency unit.

History of Demonetization in India: PM Narendra Modi has demonetised ₹ 500 and ₹ 1000 notes from 9th Nov, 2016 similar banknote demonetisation have been taken in the past. In January 1946, banknotes of ₹ 1000 and ₹ 100 were withdrawn and new notes of ₹ 1000,₹ 50 and ₹ 10000 were introduced in 1954. The Janata Party coalition government had again demonetised banknotes of? 1000, ₹5000 and ₹ 10000 on 16 Jan, 1978 as a means to curb counterfeit money and black money.

Monetary Standards
It refers to the commodity that fixes the value of the standard money used in a country. Monetary standard, on the other hand, relates to commodity by which the standard money unit is determined. A sound monetary standard aims at the following

Stability in the internal value of the currency through internal price stability.
Stability in the external value of the currency through exchange rate stability.

Monetary Standards in India
These are as follows

Gold Exchange Standard In 1898, Fowler Committee was appointed and on their recommendations, gold standard was established in India.This standard was used till 1914-15 but after the first world war put to an end the volatility of money in gold.

Paper Currency in India Reserve Bank of India was established in 1935 as Central Bank ofIndia and controller of credit. British Government had given right of issuing of currency notes to Bank of Bengal, but from 1st April, 1935, the only rights of issuing currency was given to RBI.

Capital Market

Capital market is one of the most important segments of the Indian financial system. It is the market available to the companies for meeting their requirements of the long term funds. It refers to all the facilities and the institutional arrangements for borrowing and lending funds. In other words, it is concerned with the raising of capital money for purposes of making long term investments.

The demand for long term capital comes predominantly from private sector manufacturing , industries, agriculture sector, trade and to government agencies, while the supply of funds for the capital market comes largely from individual and corporate savings, banks, insurance companies, specialized financing agencies and the surplus of governments. The Indian capital market is broadly divided into the following

Gilt edged market
The Industrial Securities Market

Securities Exchange Board of India (SEBI)
The regulatory authority under the SEBI Act, 1992 was established on 12 April, 1992 in order toprotect the interests of the investors in securities as well as to promote the development of the capital market. SEBI has its headquaters at Mumbai and its regional offices in New Delhi, Kolkata, Chennai and Ahmedabad respectively.

It involves regulating the business in stock exchanges supervising the working of stock brokers, share transfer agents, merchant bankers, underwriters etc, as well as prohibiting unfair trade practices in the securities market.

Function of SEBI
The main functions of SEBI are as follows

To regulate the business of the stock market and other securities market.
To promote and regulate the self-regulatory organisations.
To prohibit fraudulent and unfair trade practices in securities market.
To promote awareness among investors and training of intermediaries about safety of market.
To prohibit insider trading in securities market.
To regulate huge acquisition of shares and take over of companies.

SEBI’s Guidelines in 1999
The SEBI, had issued guidelines in 1999 (referred to as ESOP Guidelines) to provide a regulatory framework for the listed companies to implement security based compensation schemes.

New Law of SEBI, 2014
In August 2014, the Securities Laws (Amendment) Act, 2014, gave SEBI additional powers, including to order the arrest of violators and seek call data records of individuals under investigation. The new law gave SEBI the powers to search and obtain information, including call records, about any suspected entity from within or outside the firm.

The main objectives of SEBI Amendment Act, 2014 are as following

To empower SEBI to seek permission for search and seizure from a designated Court/Magistrate in Mumbai. Excessive delegation of power to SEBI with regard to Collective Investment Schemes.
To empower disgorgement (repayment) i.e. amount of profit made or the loss averted in the said fraudulent transaction.
Securities Appellate Tribunal’s (SAT) power with regard to settlement proceedings.
A set of new provisions in the form of Section 26A to 26E has been inserted by the Act, which provides for the establishment of Special Courts for speedy trial of all offences committed under the SEBI Act.
Rationalising the penalties that can be imposed under the Act.

Indian Capital Market
The capital market in India is a market for securities, where companies and government can raise long term funds. It is a market designed for the selling and buying of stocks and bonds. This market refers to the market which deals in equities and debentures of the corporates.

It is further divided into two parts

Primary Market: Primary market (new issues market) deals with ‘new securities’, i.e. securities which were not previously available and are offered to the investing public for the first time. It is the market for raising fresh capital in the form of shares and debentures.It provides the issuing company with additional funds for starting a new enterprise or for either expansion or diversification of an existing one and thus, its contribution to company financing is direct. The new offerings by the companies are made either as an Initial Public Offering (IPO) or rights issue.Initial Public Offering (IPO) or Stock Market Launch is ; a type of public offering where shares of stock in a i company are sold to the general public, on a securities | i exchange for the first time. Through this process, a = private company transforms into a public company.
Secondary Market: Secondary market/Stock market (old issues market or stock exchange) is the market for buying and selling securities of the existing companies. Under this, securities are traded after being initially offered to the public in the primary market and/or listed on the stock exchange. The stock exchanges are the exclusive centres for trading of securities.Security market is an economic institute within which the sale and purchase transactions of securities take place between subjects of the economy on the basis of demand and supply.

Difference between Money Markets and Capital Markets

	Money Markets	Capital Markets
Duration	It is for short term funds (1 year or less).	It is for long term funds (more than 1 year).
Instruments	Instruments are T- bill, commercial papers, certificates of deposit, etc.	Instruments are shares, debentures, bonds, etc.
Institutions	Centred Banks, commercial banks, acceptance houses, non-banking financial institutions, bill brokers, etc.	Stock exchanges, Commercial Banks and non-banking institutions such as insurance companies, mortgage banks, building societies, etc.
Broker	Transaction without the help ofbroker.	Transaction have to be Conducted with the help ofbroker.
Market	Commercial	The institutions are
Regulation	banks are closely regulated.	not much regulated.

Types of Bond Markets: The Securities Industry and Financial Markets Association (SIFMA) classified the broad bond market into five specified bond markets.They are
It is defined as the environment in which the issuance and trading of debt securities occurs. The bond market primarily includes government issued securities and corporate debt securities and facilitates the transfer of capital from servers to the issuers or organisations requiring capital for government projects, business expansions and ongoing operations.

Corporate
Government and agency
Municipal
Mortgage backed
Fund

Bond Market Participants: These participants are similar to participants in most financial markets

Institutional investors
Traders
Individuals
Governments

Stock Market: An equity market or stock market is the aggregation of buyers and sellers (a loose network of economic transactions, not a physical facility or discrete entity) of stocks (share), these are securities listed on stock exchange as well as those only traded privately.

Share Market: A share is one unit into which the total share capital is divided. Share capital of the company can be explained as a fund or sum with which a company is formed to carry on the business and which is raised by the issue of shares. Shares are the marketable instruments issued by the companies in order to raise the required capital. These are very popular investments which are traded everyday in the stock market and the value of the share at the end of the day decides the value of the firm.

D-Mat Account
In India, shares and securities are held electronically in a Dematerialised account (D-Mat account) instead of the investor taking physical possession of certificates.A Dematerialised account is opened by the investor while registering with an investment broker (or sub-broker).

The Dematerialised account number is quoted for all transactions to enable electronic settlements of trades i to take place. Every shareholder will have a Dematerialised account for the purpose of transacting shares.

Types of Shares
The shares which are issued by companies are of two types

Equity Shares: These shares are issued and are traded everyday in the stock market. Equity shareholders only get dividend after preference shareholders and debenture holders. The returns on the equity shares are not at all fixed.It depends on the amount of profits made by the company. The Board of Directors decides on how much of the dividends will be given to equity shareholders. Shareholders can accept to it or reject the offer during the annual general meeting. Equity shareholders have the right to vote on any resolution placed before the company.
Preference Shares: These are other type of shares. The preference shares are market instrument issued by the companies to raise the capital. Preference shares have the characteristics of both equity shares and debentures.Fixed rate of dividends are paid to the preference shareholder as in case of debentures, irrespective of the profits earned company is liable to pay interest to preference shareholders.

Debentures
Debentures are creditorship securities representing long term indebtedness of a company. A debenture is an instrument executed by the company under its common seal acknowledging indebtedness to some person or persons to secure the sum in advance.Debentures are usually secured by the company by a fixed or floating debentures at periodical intervals, generally 6 months and the*.company agrees to pay the principal amount at the expiry of the stipulated period according to their terms of issue. Like shares, they are issued to the public at part, at a premium or at a discount. Debenture holders are creditors of the company.

They have no voting rights, but their claims rank prior to preference shareholders and equity shareholders. Their exact rights depend upon the nature of debentures they hold.

Advantages of Debentures
It involves less cost to the firm than the equity financing because

investors consider debentures as a relatively less risky investment alternative and therefore, require a lower rate of return.
interest payments are tax deductible.
the floatation costs on debentures is usually lower than floatation costs on common shares.
debenture holders do not have voting rights and therefore, debenture issue does not cause dilution of ownership.
debenture holders do not participate in extraordinary earnings of the company. Thus, their payments are limited to interest.
during periods of high inflation, debenture issue benefits the company. Its obligations of paying interest and principal, which remain fixed, decline in real terms.

Types of Debentures
The major types of debentures are as follows

On the Basis of Record Point of View

Registered Debentures: These are the debentures that are registered with the company The amount of such debentures is payable only to those debenture holders, whose name appears in the register of the company.
Bearer Debentures: These are the debentures which are not recorded in a register of the company. Such debentures are transferable merely by delivery. Holder of bearer debentures is entitled to get the interest.

On the Basis of Security

Secured or Mortgage Debentures: These are the debentures that are secured by a charge on the assets of the company. These are also called mortgage debentures. The holders of secured debentures have the right to recover their principal amount with the unpaid amount of interest on such debentures out of the assets mortgaged by the company.
Unsecured Debentures Debentures: which do not carry any security with regard to the principal amount or unpaid interest are unsecured debentures. These are also called simple debentures.

On the Basis of Redemption

Redeemable Debentures: These are the debentures which are issued for a fixed period. The principal amount of such debentures is paid off to the holders on the expiry of such period. These debentures can be redeemed by annual drawings or by purchasing from the open market.
Non-Redeemable Debentures: These are the debentures which are not redeemed in the life time of the company. Such debentures are paid back only when the company goes to liquidation.

On the Basis of Convertibility

Convertible Debentures: These are the debentures that can be converted into shares of the company on the expiry of pre-decided period. The terms and conditions of conversion are generally announced at the time of issue of debentures.
Non-Convertible Debentures: The holders of such debentures cannot convert their debentures into the shares of the company.

On the Basis of Priority

First Debentures: These debentures are redeemed before other debentures.
Second Debentures: These debentures are redeemed after redemption of first debentures.

Stock Exchanges in India
Bombay Stock Exchange (BSE), the oldest stock exchange in Asia, was established in 1875. It is synonomous with Dalai Street. BSE was corporatised and renamed BSE Limited in 2005. In 1894, the Ahmedabad Stock Exchange was started to facilitate dealing in the shares of textile mills.

In 1908, Calcutta Stock Exchange was started to facilitate market for shares of plantations and jute mills. At present, there are 21 stock exchanges in the country.

List of Approved Stock Exchanges in India: Approved stock exchanges in India are as follows

UP Stock Exchange, Kanpur
Vadodra Stock Exchange, Vadodara
Coimbatore Stock Exchange, Coimbatore
United Stock Exchange of India Limited
Bombay Stock Exchange, Mumbai
Over The Counter Exchange of India, Mumbai
National Stock Exchange, Mumbai
Ahmedabad Stock Exchange, Ahmedabad
Bangalore Stock Exchange, Bengaluru
Bhubaneshwar Stock Exchange, Bhubaneshwar
Calcutta Stock Exchange, Kolkata
Cochin Stock Exchange, Cochin
Delhi Stock Exchange, Delhi
Guwahati Stock Exchange, Guwahati
Hyderabad Stock Exchange, Hyderabad
Jaipur Stock Exchange, Jaipur
Ludhiana Stock Exchange, Ludhiana
Chennai Stock Exchange, Chennai
Madhya Pradesh Stock Exchange, Indore
Pune Stock Exchange, Pune
Interconnected Stock Exchange of India Limited

Tit – Bits

Bull and Bear A bull market is a period of generally rising prices. A bear market is a general decline in the stock market.
Penny stock They are common shares of small public companies that trade at low prices per share.
Badla Badla was an indigenous carry forward system inverted on the BSE as a solution to the perpetual lock of liquidity in the secondary market. It was banned by SEBI in 1994.

National Stock Exchange (NSE)
NSE was promoted by leading financial institutions at the behest of the Government of India and was incorporated in November, 1992 as a tax-paying company unlike other stock exchanges in the country. On the basis of the recommendations of high powered Pherwani Committee, the National Stock Exchange was incorporated in November, 1992.

Indices of NSE

S and P CNX Nifty (NSE-50, renamed on July, 1998)
CNX Nifty Junior
CNX 100
S and P CNX 500 (Crisil 500 renamed on July, 1998)
CNX Midcap Nifty Midcap 50
S and P CNX Deflty
S and P CNX Nifty Dividend
India VIX

MIBOR and MIBID
NSE had developed MIBID (Mumbai Inter Bank Bid I Rate) and MIBOR(Mumbai Inter Bank Offer Rate) for the overnight market. This was launched sometime l in 1998. They are the reference rates, then NSE > launched the 14 days MIBID/MIBOR and then the 1 month and the 3 months MIBOR and MIBID. Thus all the 4 categories of MIBOR and MIBID are now available.

It is the simple average of the quotes by the various participants in the market banks, PDs, institutions polled on a daily basis.

LIBOR (London Inter Bank Offered Rate) It is the average of interest rates provided by leading banks in London that they would be charged while borrowing from other banks. It is used as a global benchmark interest rate by many banks around the world.

World’s Most Important Index

Index	Place
DOLLEX, SENSEX, S and P CNX-NIFTY FIFTY BANKEX	Mumbai
Dow Jones	New York
Nikkei	Tokyo
MIDDAX	Germany
HONG SENG	Hongkong
SIMEX, STRAITS TIMES	Singapore
KOSPI	Korea
SET	Thailand
TAIEN	Taiwan
SHANGHAI COM	China
NASDAQ	USA
SandP	Canada
BOVESPA	Brazil
MIBTEL	Itali
IPC	Mexico

Bombay Stock Exchange (BSE)

It was established in 1875, BSE Limited (formerly known as Bombay Stock Exchange Limited), is Asia’s first stock exchange and one of India’s leading exchange groups. Over the past 137 years, BSE has facilitated the growth of the Indian corporate sector by providing it an efficient capital raising platform.

Major BSE Indices
Five share indices are working under BSE which are as follows

SENSEX: It is measured by sensory index and at present 30 companies are notified under it.
BSE 500: This new index started operation in the year 1999 by BSE and it is the biggest base index.
National Index: 100 companies are there in this index and it is coated by the regional share markets.
BSE 200: It is the share index of 200 biggest base companies. It is also called Dollex as it also depicts the value of the American Dollar.
Indo Next: It is established by BSE and Federation of India Stock Exchange (FISE) with the aim of liquidity among small companies encouraging.

BSE-GREENEX

Bombay Stock Exchange on 22nd Feb, 2012 has launched a new index called ‘BSE-GREENEX’ which measures the performance of the company’s interims of Carbon Emissions. The top-ranking companies from each sector like power, steel, cement have made it to the new index called BSE-GREENEX. Greenex has 20 companies from the broader BSE 100 index that meet energy efficiency norms, allowing investors to derive benefit from the related cost savings.

Around 5000 companies are listed on BSE, making it world’s No. 1 exchange in terms of listed members. BSE limited is world’s 5th most active exchange in terms of number of transactions handled through its electronic trading system. It is also one of the world’s leading exchange (5th largest in May, 2012) for index options trading (Source-World Federation of Exchanges).
BSE is the first exchange in India and second in the world to obtain an ISO 9001:2000 certification.
It is also the first exchange in the country and second in the world to receive Information Security Management System Standard certification for its BSE On-line Trading System (BOLT).

Over the Counter Exchange of India (OTCEI)
Traditionally, trading in stock exchanges in India followed a conventional style, where people used to gather at the exchange offices and bids and offers were made by open outcry. This old-age trading mechanism in the Indian stock markets used to create many functional in efficiencies. OTCEI was incorporated in 1990, under the Companies Act, 1956.

OTCEI is the first screen based nationwide stock exchange in India created by Unit Trust of India (UTI), Industrial Credit and Investment Corporation of India (ICICI), Industrial Development Bank of India (IDBI), SBI capital markets, Industrial Finance Corporation of India (IFCI), General Insurance Corporation (GIC) and its subsidiaries and bank financial services.

Residex
Keeping in view, the prominence of housing and real estate as a major area for creation of both physical and financial assets and its contribution in overall national wealth, a need was felt for setting up of a mechanism which could track the movement of prices in the residential housing segment. Regular monitoring of the house prices can be useful inputs for the different interest groups.

Futures Market

A futures market is an auction market in while participants buy and sell commodity and future contracts for delivery on a specified future date.Examples of future markets are the New York Mercantile Exchange, the Kansas City Board of Trade, the Chicago Mercantile Exchange, the Chicago Board of Options Exchange and the Minneapolis Grain Exchange. Originally, trading was carried on though open yelling and hand signals in a trading pit, though in the 21st century, like most other markets, future exchanges were mostly electronic.

Merging of SEBI and Future Market Commission

With the Forward Markets Commission (FMC) formally got merged with SEBI on 28th Sep, 2015. The first priority would be to develop trust in the commodities market and then the focus would be ; on developing the market.

MCX Stock Exchange (MCX-SX)
It is a private stock exchange headquartered in Mumbai, which was founded in 2008. Now, it is a MCX-SX full-fledged stock exchange. Securities and Exchange Board of India (SEBI) on 10th July, 2012 granted permission to MCX Stock Exchange (MCX-SX) to operate as full-fledged stock exchange. MCX-SX would be able to offer additional asset classes such as equity and equity F and O (Futures and Options) interest rate futures and wholesale debt segments. SEBI has not allowed the exchange to operate in segments other than currency derivatives. This move of SEBI will bring more competition in the market.

Commodity Exchange

Multi-Commodity Exchange of India Limited (MCX)
National Commodity and Derivatives Exchange Limited (NCDEX)
National Multi-Commodity Exchange (NMCE)
Indian Commodity Exchange Limited ICEX
MCX Stock Exchange (MCX-SX)
Universal Commodity Exchange (UCX)

Future Trading of Foreign Currency
It is exchange where people can trade standardised future contract. That is a contract to buy specific quantities of a commodity at specified price with delivery set at a specified time in future.

Apart from this, India has (ICE) regional exchanges. All these commodity exchange are overseen by Forward Market Commission (FMC), which was setup in 1953.

Reference Rates
A reference rate is an accurate measure of the market price. In the fixed income market, it is an interest rate that the market respects and closely watches. It plays a useful role in a variety of situations.

Credit Rating

It is a company that assigns credit ratings to institutions that issue debt obligations i.e. assets backed by receivables on loans, such as mortgage backed securities.

These institutions can be companies, cities, non-profit organisations or national governments and the securities they issue can be traded on a secondary market. Credit Rating Agency at present, there are four credit rating agencies in the country. They are

Credit Rating Information Services of India (CRISIL)
Investment Information and Credit Rating Agencies of India (CRAI)
Credit Analysis and Research (CART)
Duff Falps Credit Rating India Private Limited (DCR India)
Cruist is the first credit rating agency of the country started in its functionary, since 1988.

Credit Rating Information Services of India Limited (CRISIL)
It is a global analytical company providing ratings, research, risk and policy advisory services. CRISIL’s majority shareholder is Standard and Poor’s, a division of McGraw Hill financial and provider of financial market intelligence. Headquarter of CRISIL is in Mumbai. CRISIL ratings has rated/assessed over 61000 entities in India.

International Cultivar Registration Authorities (ICRA)
It is an Indian independent and professional investment information and credit rating agency. It was established in 1991 and was originally named Investment Information and Credit Rating Agency of India Limited (IICRA, India). It is second largest Indian rating company in terms of customer base.

It was a joint venture between Moody’s and various Indian commercial banks and financial services companies. Headquarter of ICRA is Gurugram.

Credit Analysis and Research Ltd. (CARE)
CARE Ratings commenced operations in April,1993 and over nearly two decades, it has established itself as the second largest credit agency in India. CARE Ratings has also emerged as the leading agency for covering many rating segments like that for banks, sub-sovereigns and IPO gradings.

Various Countries and their Currencies

Country	Currency
Afghanistan	Afghan Afghani
Algeria	Algirian dinar
Argentina	Argentine peso
Australia	Australian dollar
Austria	Euro
Bangladesh	Bangladeshi taka
Belarus	Belarusian rusle
Belgium	Euro
Bhutan	Ngultrum
Brazil	Brazilian real
Myanmar (Burma)	Burmese kyat
Canada	Canadian dollar
Chile	Chilean peso
China	Yuan
Cyprus	Euro
Denmark	Danish krone
Egypt	Egyption pound
Fiji	Fijian dollar
France	Euro
Germany	Euro
Hong Kong	Hong kong dollar
India	Indian rupee
Indonesia	Indonesian rupian
Iran	Iranian rial
Iraq	Iraqi dinar
Ireland	Euro
Israel	Israeli new shekel
Italy	Euro
Japan	Yen
Kazakhstan	Kazakhstani tenge
Libya	Libyian dinar
Malaysia	Malaysian rufiyaa
Maldives	Maldivian rufiyaa
Mauritius	Mauritian rupee
Mexico	Mexican peso
Nepal	Nepalese rupee
New Zealand	New Zealand dollar
Nigeria	Nigerian naira
Pakistan	Pakistani rupee
Philippines	Philippine peso
Qatar	Qatari riyal
Romania	Romanian len
Russia	Russian ruble
Saudi Arabia	Sandi riyal
Singapore	Singapore dollar
South Africa	South African rand
Sri Lanka	Sri Lankan rupee
Switzerland	Swiss franc
Taiwan	New Jaiwan dollar
Thailand	Thai baht
Turkey	Turkish lira
Ukraine	Ukranian hryvnia
UAE	UAE
United Kingdom	British pound
USA	Dollar
Veitnam	Vietnamese dong
Zimbabwe	South African rand

QUESTION BANK

Commercial paper can be issued

by all corporates
by all corporates with net worth of atleast ₹ 10 crore
by all corporates with net worth of atleast ₹5 crore
can be issued only by banks
All of the above

2. Commercial bills market is a part of

organised money market
unorganised money market
stock market
capital market
None of the above

3. Interest is usually paid on money market instruments

at maturity
on request
twice a year
annually
All of these

4. If the monetary standard based on gold, it is called

gold standard
silver standard
double standard
multi standard
None of these

5. The gold standard was broken down in the year

1936
1946
1956
1966
1970

6. Government securities with terms of more than 1 year are called

government bonds
treasury bills
bills of exchange
capital bills
None of these

7. Money that a government has required to be accepted in settlement of debts is

barter money
commodity money
legal tender
currency value
None of these

8. Which of the following is not a money market instrument?

Treasury Bills
Commercial Paper
Certificate of Deposit
Equity Share
None of these

9. Which of the following cannot issue a Commercial Paper?

Companies
Primary Dealers
Commercial Banks
All Indian Financial Institution
None of the above

10. Maximum period for which a commercial paper can be issued is

3 months
6 months
1 yr
2 yr
None of these

11. Treasury Bills means

salary bills drawn by Government officials on the treasury
bills drawee by the Government contractors and other suppliers on the treasury for the dues owed to them by the Government
obligation of the Government of India issued by the Reserve Bank of India and payable normally 91 days after issue
a mode of drawings by the Treasury Office on the Reserve Bank of India
None of the above

12. Which one of the following is the major component of the money supply in the Indian Economy?

Currency component
Deposit component
Treasury bill with public
Both 1 and 2
Both 2 and 3

13. Which of the following organisations is known as the market regulatonin India?

IBA
SEBI
AMFI
NSDL
None of these

14. Which of the following was the first mutual fund listed on the newly launched mutual fund platform on National Stock Exchange?

UTI Mutual Fund
SBI Mutual Fund
LIC Mutual Fund
Bank of Baroda Mutual Fund
None of the above

15. SEBI allows retail investors to apply for shares of Initial Public Offerings without actual transfer of their funds from their accounts. What is this facility known as?

Systematic transfer plans
Systematic investment plans
Hedge fund accounts
ASBA
None of the above

16. Which of the following best describes the Securities and Exchange Board of India?

SEBI is the regulator for the capital markets
SEBI protects the interest of investors
SEBI is for ethical practices
All of the above
None of the above

17. The stock market index of London, stock market is referred as

sensex
footsie (FTSE)
nifty
bullish
None of these

18. Which is the first Indian company to be listed on NASDAQ?

Reliance
TCS
HCL
Infosys
None of these

19. In the capital market, the term arbitrage is used with reference to

purchase of securities to cover the sale
sale of securities to reduce the loss on purchase
simultaneous purchase and sale of securities to make profits from price
variation in different markets
All of the above

20. What is an Indian depository receipt?

A deposit account with a public sector bank
A depository account with any of the depositories in India
An instrument in the form of depository receipt created by an Indian depository against underlying equity shares of the issuing company
An instrument in the form of deposit receipt issued by Indian depositories
None of the above

21. Capital market regulator is

RBI
IRDA
NSE
BSE
SEBI

22. The maturity period of a cash management bill can be

less than 364 days
less than 182 days
less than 91 days
any period at discretion of the Govt.
None of the above

23. Which of the following is the regulator of the credit rating agencies in India?

RBI
SBI
SIDBI
SEBI
None of these

24. Which of the following cannot be called as a debt instrument as referred in financial transactions?

Certificate of deposits
Bonds
Stocks
Commercial papers
Loans

25. The availability or cash and other cash like marketable instruments that are useful in purchases and investments are commonly known as

cash crunch
liquidity
credit
marketability
None of these

26. In a company, the use of price-sensitive corporate information by the company people to make gains or cover losses is known as

insider trading
future trading
foreign trading
stock- trading
None of these

27. Which of the following financial products are not much popular in India as they have been launched only recently?

Development bonds
Insurance policies
Mutual funds
Sovereign wealth funds
All are very popular products in India

28. The actual return of an investor is reduced sometimes as the prices of the commodities go up all of a sudden. In financial sector, this type of phenomenon is known as

probability risk
market risk
inflation risk
credit risk
None of the above

29. Many a times, we read a term ‘SEPA’ in financial newspapers. What is the full form of the SEPA?

Single Exchange Processing Agency
Single Euro Payments Area
Single Electronic Processing Agency
Super Electronic Purchase Agency
None of the above

30. What is the full form of ‘ULIP’, the term which was in the news recently?

Universal Life and Investment Plan
Unit Loan and Insurance Plan
Universal Loan and Investment Plan
Uniformly Loaded Investment Plan
Unit Linked Insurance Plan

31. In one of his speeches, Pranab Mukherjee said that the government had no plans to dilute the roles of market regulators. This means, the role of which of the following will not be diluted?

Life Insurance Corporation of India (LIC)
Confederation of Indian Industry (CII)
Federation of Chambers of Commerce and Industry (FICCI)
Bureau of Indian Standards
Securities and Exchange Board of India (SEBI)

32. Equity schemes managed strong NAV gains which boost their assets’ was a new in some financial newspapers. What is the full form of NAV used as in above headlines?

Nil Accounting Variation
Net Accounting Venture
Net Asset Value
New Asset Venture
None of the above

33. As per the announcement made by the RBI, some stock exchanges in India are allowed to introduce Plain Vanilla Currency Option. The term Plain Vanilla Currency Option is associated with which of the following activities/operations?

Dollar Rupee exchange rate
Floating of commercial papers
Launch of new mutual funds
Deciding the opening price of a share on a particular business day
None of the above

34. A ……is a type of transferable financial instrument traded on a local stock exchange of a country but represents a security issued by a foreign publicly listed company.

depository receipt
derivative
option
participatory notes
None of these

35. What is the maturity period of treasury bills issued by Govt, of India?

14 and 91 days
91 and 182 days
14 and 182 days
91, 182 and 364 days
None of these

36. Specified interest rate on a fixed maturity security fixed at the time of issue is called

market rate of interest
call rate
repo rate
coupon rate
discount rate

37. Money lent for 15 days or more in Inter bank market is called

call money
notice money
term money
All of these
None of these

38. Money lent for one day is called

call money
notice money
term money
All of these
None of these

39. First share market in India was established in

Delhi
Mumbai
Kolkata
Chennai
None of these

40. The primary issuers of capital market securities include

the Central Government
the Local Government
corporations
the Central and Local Governments and corporations
Local Government and corporations

41. Which of the following is a characteristic of a capital market instrument?

Liquidity
Marketability
Long maturity
Liquidity premium
All of these

42. Which one of the following is a capital market Instrument?

A Treasury bill
A negotiable certificate of deposit
Commercial paper
All of the above
None of the above

43. Which of the following is the Regulator of the credit rating agencies in India?

RBI
SBI
SIDBI
SEBI
None of these

44. What is the maximum denomination for a commercial paper?

5 lac
10 lac
25 lac
no ceiling
None of these

45. What is the minimum denomination amount for a commercial paper?

5 lac
10 lac
25 lac
15 lac
None of these

46. To issue commercial paper, a company should have

Net worth of ₹ 4 core
Sanctioned working capital limits
Loan accounts in standard Units
All of these
None of these

47. T-bills are financial instruments initially sold by to raise funds

Commercial Banks
the government
corporations
agencies of the State Government
None of the above

48. Commercial paper is a short term security issued by to raise funds

the Reserve Bank of India
Commercial Banks
large and well-known companies
National Stock Exchange
State and Local Government

49. Which of the following statements is true regarding a corporate bond?

A corporate callable bond gives the holder the right to exchange it for a specified number of the company’s common shares
A corporate debenture is a secured bond
A corporate indenture is a secured bond
A corporate convertible bond gives the holder the right to exchange the bond for a specified number of the company’s common shares
Holders of corporate bonds have voting rights in the company

50. Which one of the following is not a money market instrument?

ATreasury bill
A negotiable certificate of deposit
Commercial paper
Treasury bond
Repo

51. Which of the following statements about the money market are true?

Not all Commercial Banks deal for their customers in the secondary market
Money markets are used extensively by businesses both to warehouse surplus funds and to raise short term funds
The single most influential participant in the US money market is the US Treasury Department
All of the above are true
1 and 2 of the above are true

52. Money market instruments

are usually sold in large denominations
have low default risk
mature in one year or less
characterised by all of the above
are characterised by 1 and 2

53. The money market in India consists of two sectors namely, the organised and the unorganised sector. Which of the following do not fall under unorganised sector?

RBI, Commercial Banks and SBI
LIC and QIC
Unit Trust of India
Indigenous Banks
None of these

54. Interest is calculated on actual/365 days basis respect of the following products, except one

Call money
Notice money
Term money
Gol dared securities
None of these

55. Treasury bill is

negotiable security
non-negotiable security
no security at all
quasi-negotiable security
None of the above

56. Who issues treasury bills?

Reserve Bank of India, as the agent of the Central Government
Any govt deptt. of State and Central
Any commercial bank
All of the above
None of the above

57. The treasury bills are issued at a

discount
premium
Both 1 and 2
face value
None of the above

58. For issuing a commercial paper, a company should have credit rating of

AAA
P2 from CRISIS or equivalent
P2 from any of rating agencies
Not required any more
None of the above

59. Choose the correct statements.
I. A reference rate is an accurate measure of the market price.
II. NSE had developed MIBID and MIBOR for the overnight market.
III. MIBID and MIBOR was launched in 2005.

Codes

I and II
II and III
I and III
All of the above
None of the above

60. Consider the following statements
I. Call Money- Money lent for 1 days.
II. Notice Money – Money sent for a period exceeding 1 day.
III. Term Money – Money lent for 15 days or more in inter bank market

Which is/are correct?

I and II
II and III
I, II and m
I and III
Only III

61. Choose the correct statements.
I. The small coins of 50 paise is legal tender money.
II. Legal tender money is enforced by law.
III. Limited legal tender money is accepted only upon a certain limit.

Codes

Only II
I and II
I, II and III
II and III
None of these

62. Consider the following statements.
I. Bombay Stock Exchange (BSE) is the oldest stock exchange in Asia.
II. BSE was established in 1875.
III. BSE was corporatised and renamed BSE limited in 2005.

Which is/are correct?

Only III
I and III
II and HI
I and II
I, II and III

63. Choose the correct statements;
I. Treasury bills are money market instruments.
II. Commercial Bill is a short term, negotiable and self-liquidating instrument with low risk.
III. Treasury bills are issued by the Central Government to secure short term loans.

Codes

Only II
II and III
I and II
I, II and III
I and III

64. Many times, we read about future trading in newspapers. What is ‘future trading’?
I. It is nothing but a trade between any two stock exchanges, wherein it is decided to purchase the stocks of each other on a fixed price throughout the year.
II. It is an agreement between two parties to buy or sell an underlying asset in the future at a predetermined price.
III. It is an agreement between stock exchanges that they will not trade the stocks of each other under any circumstances in future or for a given period of time.

Select the correct answer using the codes given below

Only I
Only II
Only III
II and III
None of these

65. FIMMDA stands for [Allahabad Bank 2011]

Foreign Investment Markets and Derivatives Market Association
Fixed Income Money Markets and Derivatives Association
Fixed Income and Money Market Development Association
Floating Income and Money Markets Derivative Assets
None of the above

66. Many times, we read in newspapers that a company is planning to bring a public issue. What does it mean? [Syndicate Bank 2011]
I. Shares of the company will be issued only through public sector organisations like banks/central financial institutions etc.
II. Shares of the company will be issued to general public only through primary market.
III. This means some stakeholders/promoters are willing to leave company. Hence, they wish to sell their stock to the general public.

Select the correct answer using the codes given below

Only I
Only II
Only III
All of these
None of these

67. SEBI is a/an [Indian Overseas Bank 2011]

advisory body
statutory body
constitutional body
non-statutory body
registered as a society

68. Which of the following organisations/ agencies has established a fund known as Investor Protection Fund? [Indian Overseas Bank 2011]

RBI
SIDBI
Bombay Stock Exchange
Ministry of Finance
Ministry of Commerce and Industry

69. Which of the following bodies promoted Securities Trading Corporation of India Limited (STCI) jointly with the public sector banks? [Indian Overseas Bank 2011]

SEBI
ICICI Limited
IDBI Limited
RBI
IRDA

70. Which of the following is not a component or India’s securities market? [Andhra Bank 2011]

Commodity futures
Small savings in national saving certificates
Government bonds
Corporate equity
Derivatives on currency

71. Non-convertable debentures are [IBPS PO 2012]

debt instruments which acquire equity ‘status at the issuers’ option
debt instruments which acquire equity status at the investors option
debt instruments which acquire equity status with the permission of Registrar of Companies
debt instruments which acquire equity status on maturity
debt instruments which retain their debt character and cannot acquire equity status

72. Which of the following stock exchanges in India, recently launched ‘Carbon Index’, so that investors can assess risk and opportunities associated with climate change? [IBPS Specialist Officer 2012]

Delhi Stock Exchange
National Stock Exchange
Bombay Stock Exchange
Kolkata Stock Exchange
Ahmedabad Stock Exchange

73. Which of the following is the main advantage of ‘ASBA’ applicants for share allotment? [IBPS Specialist Officer 2012]

They have got secured allotment of shares
They have got certain preference in allotment of shares as compared to general applicants
They need not remit the fund for allotment of shares, they will do so after shares are allotted to them
Their deposit/OD account is not debited, only the funds are blocked for the same and they continue to avail interest till the shares are allotted to them
None of the above

74. MCX is the index of which of the following stock exchanges of India? [SBl PO 2012]

National Stock Exchange
Bombay Stock Exchange
Delhi Stock Exchange
Kolkata Stock Exchange
Multi Commodity Stock Exchange

75. Which of the following terms is not used in banking/finance? [SBl PO 2012]

Public Debt
Plasma
Joint Venture
Net Demand and Time Liability
Treasury Bill

76. Which of the following Organisations is the Regulators of Stock Exchanges in India? [SBl Assistant 2012]

RBI
SIDBI
SEBI
NABARD
IBA

77. What does the letter ‘D’ denote in the term ‘SDR’? (as used in Finance) [SBl Assistant 2012]

Deposits
Data
Drawing
Debt
Dealers

78. Which of the following terms is not directly associated with the functioning of RBI? [SBl Assistant 2012]

Open Market Operations
Cash Reserve Ratio
SENSEX
Liquidity Adjustment Facility
Public Debt Office

79. A new scheme has been announced in the budget 2012-13 giving tax exemptions to first time equity market investors. The scheme is titled as [SBl Assistant 2012]

Rajiv Gandhi Equity Savings Scheme
Rashtriya Equity Saving Scheme
National Equity Savings Scheme
Indira Gandhi Equity Savings Scheme
Prime Minister’s Equity Savings Scheme

80. Which of the following is a receipt listed in India and traded in rupees declaring ownership of share of a foreign company? [IBPS PO 2013]

Indian Depository Receipt (IDR)
European Depository Receipt (EDR)
Global Depository Receipt (GDR)
American Depository Receipt (ADR)
Luxemburg Depository Receipt (LDR)

81. An Equity share is also commonly referred to as [IBPS PO 2013]

ordinary share
debenture
convertible share
security Receipt
preferred stock

82. A non performing asset is [SBl PO 2013]

money at call and short notice
an asset that ceases to generate income
cash balance in till
cash balance with RBI
balance with other banks

83. BSE (Bombay Stock Exchange), the oldest stock exchange in Asia has joined hands with one more International index in February, 2013. This association has resulted in change of name of BSE index. What is the change of name effected? [SBl PO 2013]

Dow Jones BSE Index
NASDAQ BSE Index
S & P BSE Index
Euronext BSE Index
Other than those given as options

84. Which of the following organisation is made specifically responsible for empowering Micro, Small and Medium enterprises in India? [SBl PO 2013]

NABARD
RBI
SIDBI
ECGG
SEBI

85. Commercial Paper (CP) is an unsecured money market instrument issued in the from of a promissory note. Commercial paper can be used in denominations of [SBl PO 2014]

₹one lakh or multiples thereof
₹ two lakh or multiples thereof
₹three lakh or multiples thereof
₹ five lakh or multiples thereof
₹ ten lakh or multiples thereof

86. The abbreviation ASBA stands for [SBl PO 201]

Applications Supported by Blocked Account
Applications Supported by Bank Amount
Applications Serviced by Blocked Account
Applications Serviced by Bank Account
Applications Supported by Blocked Amount

87. Which of the following institutions provides secured depository services? [IBPS Clerk 2014]

NSE
RBI
NSDL
BSE
Other than those given as options

88. A Credit Guarantee Trust Fund has been set up for guaranteeing collateral free facilities by lending institutions to small scale industries. This funds is being managed by which of the following institutions? [SBl Clerk 2014]

IDBI
NABARD
SBl
SIDBI
RBI

89. Which of the following is a sovereign instrument with a fixed coupon (payable on a specified date or half yearly) issued by Reserve Bank for market borrowing programme of the government of India?[SBl Clerk 2014]

Fixed deposits
Dated government securities
Debentures
Bonds
Equity shares of PSBs

90. A bond issued at a price less than its face value and payable on its due at its face value bearing no Rate of Interest (Rol) is called [SBl Clerk 2014]

Preference Bond
Zero Coupon Bond
Convertible Bond
Perpetual Bond
Sovereign

91. Which of the following authorities is responsible for maintaining accounts, deposits and cash management of the government through issue of Bonds and Treasury Bills? [SBl Clerk 2014]

SEBI
IBA
IRDA
SBl
RBI

92. Which one of the following is known as ‘Demat’ account? [IBPS PO 2015]

Account in which shares are held in electronic form
Other than those given as options
Account allowed to be operated by guardian of minor
Account operated by business correspondents in rural centres
Account opened with zero balance

93. The introduction of e-IPO would [IBPS Clerk 2015]

help eliminate the printing of application forms
help in reducing the overall cost of public issuance
support companies in reaching more retail investors in small towns
All of the above
None of the above

94. In periods of boom, which leads to economic instability, the Reserve Banks of India (RBI) resorts to [IBPS Clerk 2015]

hike in the Bank Rate as a measure of open market operations
buying of approved securities in the market as a measure of open market operations
sale in the market of first class securities in its possession to reduce the supply of money as a measure of open market operations
All of the above
None of the above

95. Who amongst the following is the regulator in the financial system of the country? [SBI Clerk 2015]

Other than those given a options
SEBI
CRISIL
TRAN
CERC

96. Which of the following is the negotiable instrument? [SBI Clerk 2015]

Fixed deposit of a bank
Share certificate issued by a PSU
Demant draft issued by a bank
Debenture of a company
Airway receipt

97. The segment of money market which pertains to day-to-day funds requirements of the bank, is known as [RBI Grade B 2015]

Call Money market
Capital market
Mutual fund market
Equity funds market
Index funds market

98. Which of the following stock exchanges with a median response time of 6 |ls, is now considered as the world’s fastest stock exchange? [SBI PO 2016]

New York State Exchange
National Stock Exchange of India
NASDAQ New YorkLondon Stock Exchange Group
Bombay Stock Exchange Limited

99. Which of the following is not money market instrument? [SBI PO 2016]

Treasury bills
Certificate of deposit
Commercial Bill
Promissory Notes
Gilt edged bill

100. CRISIL is a [SBI Clerk 2016]

credit rating agency
banking supervisionary agency
payment system of India
investment fund
small finance bank

101. FMC merged with [SBI clerk 2016]

SBI
CRISIL
RBI
SEBI
None of these

102. World’s largest stock exchange [SBI Clerk 2016]

New York Stock Exchange
BSE
NSE
London Stock Exchange
None of these

103.In India ‘Commodities Derivatives Market’ is regulated by ……[RBI Grade B 2016]

PFRDA
FCI
IRDAI
SEBI
RBI

ANSWERS

Banking Awareness Study Material – Origin and Development of Banking in India

April 3, 2018 by Kalyan Leave a Comment

Banking Awareness Study Material – Origin and Development of Banking in India

Banking Awareness Study Material Computer Awareness Marketing Aptitude

A bank is a financial institution that provides banking and other financial services to their customers. A bank is generally understood as an institution which provides Fundamental Banking Services such as accepting deposits and providing loans.

History of Banking in India
Banking system has been existing in India since ancient times. Though it was not in organised form before the arrival of Britishers, various banking activities were performed. After the arrival of Britishers in 17th century foreign bani- -ng system started declining. Mayser’s Alexander and company established the first European bank The Bank of Hindustan in 1770.
The development of Banking system in India can be understood with the help of following choronology. We can summarise the origin of banking in India in the following ways

Early Phase of Indian Banks before 1935
The pre-independence period was largely characterised by the existence of private banks organised as joint stock companies. Most banks were small and had private shareholding of the closely held variety. They were largely localised and many of them failed.

The first bank in India, the General Bank of India, was setup in 1786. Bank of Hindustan and Bengal Bank followed.
The East India Company established Bank of Bengal (1809), Bank of Bombay (1840) and Bank of Madras (1843) as independent units and called them Presidency banks. These three banks were amalgamated in 1920 to form Imperial Bank of India, a bank of private shareholders, mostly Europeans.
Allahabad Bank was established, exclusively by Indians, in 1865.
Awadh Commercial Bank was the first bank established in 1981 and governed by exclusively the Indians on the basis of extending loans.
Punjab National Bank was setup in 1894 with headquarters in Lahore.
Between 1906 and 1913, Bank of India (1906), Central Bank of India (1911), Bank of Baroda (1909), Canara Bank, Indian Bank (1907) and Bank of Mysore (1913) were setup.
To streamline the functioning and activities of commercial banks, the Government of In^ia came up with the Banking Companies Act, 1949, which was later changed to the Banking Regulation Act, 1949.

Organisation of RBI
Banking crisis during 1913-1917 and failure of 588 l banks in various parts of the country underlined the need for regulating and controlling the commercial banks. RBI was established as regulator of banking system of India. It was established in 1935. The Head Office of the RBI was established in Calcutta (now Kolkata, but was moved to Bombay (now Mumbai) in 1937.

The general functions of the banks are as follows:

To provide security to the savings of customers.
To control the supply of money and credit.
To encourage public confidence in the working of the financial system increase savings speedily and efficiently.
To avoid focus of financial powers in the hands of a few individuals and institutions.
To set equal norms and conditions (i.e. rate interest, period of lending, etc) to all types of customers.

Banking Sector Reforms till 1991

In 1955, government nationalised the Imperial Bank of India and gave the name ‘State Bank of India’ to act as the principal agent of the RBI and to handle banking transactions of the Union Government and State Governments all over the country.
7 banks owned by the Princely states were nationalised in 1959 and they became subsidiaries of the State Bank of India. In 1969,14 commercial banks in the country were nationalised.
In the phase of banking sector reforms, 7 more banks were nationalised in 1980. With this, 80% of the banking sector in India came under the government ownership.

New Phase of Indian Banking System, Reforms after 1991

This phase has introduced many more products and facilities in the banking sector as part of the reforms process.
In 1991, under the chairmanship of M Narasimham, a committee was setup, which worked for the liberalisation of banking practices.
In this phase, the country is flooded with foreign banks and their ATM stations. Efforts are being put to give a satisfactory service to customers.
Phone banking and net banking are introduced. The entire system became more convenient and swift.

Nationalisation of Banks
The nationalisation of commercial banks took place with an aim to achieve Social Welfare, Controlling Private Monopolies, Expansion of Banking, Reducing Regional Imbalance, Priority Sector Lending and Developing Banking Habits. In order to have more control over banks, on 19th July, 1969 Mrs Indira Gandhi, the then Prime Minister nationalised 14 large commercial banks whose reserves were more than Rs 50 crore. Following is the list of banks, which got nationalised at that time

Allahabad Bank
Bank of Baroda
Bank of India Bank of Maharashtra
Central Bank of India
Canara Bank
Dena Bank
Indian Bank
Indian Overseas Bank
Punjab National Bank
Syndicate Bank
UCO Bank
Union Bank
United Bank of India

On 15th April, 1980 the banks with more than Rs 200 crore of reserves got nationalised.
Those six banks which got nationalised are the following:

Andhra Bank
Corporation Bank
New Bank of India
Oriental Bank of Commerce
Punjab and Sindh Bank
Vijaya Bank

Later on, in the year 1993, the government merged New Bank of India with Punjab National Bank. It was the only merger between nationalised banks. Now, total nationalised banks were 19.

Indian Banking Structure
An outline of the Indian banking structure may be presented as follows :

Indian banking industry has been divided into two parts, organised sectors and unorganised
The organised sector consists of Reserve Bank of India, Commercial Banks, Co-operative Banks and Specialised Financial Institutions (ICICI, EFC, etc).

Scheduled Banks
Scheduled banks are those banks whose minimum paid up capital and reserve amounts to Rs 25 lakh.
These bank have to submit details of their activities to the Reserve Bank of India every week. All Indian and foreign commercial banks, RRBs and co-operative banks are scheduled banks.

Non-Scheduled Banks
Non-scheduled banks are depository or lending institutions that do not meet the Second Schedule of Reserve Bank of India Act.
These banks may be legal entities, but they do not have procedural endorsement of the government. The bank has to pay compulsorily a reserve capital of Rs 5 lakh to the RBI and this capital must be maintained throughout their operational period. It is an important condition for Non-scheduled bank.

Tit-Bits

IDBI Bank Ltd. merged with IDBI Ltd. on 2nd April, 2005.
Bank of Punjab Ltd. merged with Centurian Bank Ltd. on 1st Oct, 2005.
On 13th August, 2010, The Bank of Rajasthan merged with ICICI Bank Ltd.
Kotak Mahindra Bank merged with INQ Vyasa Bank in 2014.

Commercial Banks
This is a financial institution providing services for businesses, organisations and individuals. Services include offering current, deposit and saving accounts as well as giving out loans to businesses. A commercial bank is defined as a bank whose main business is deposit-taking and making loans. Commercial bank may be Scheduled Commercial and Non-Scheduled Commercial Bank.

Functions of Commercial Banks
The main functions of commercial banks are as follows:

Receive Deposits: The most important activity of a Commercial Bank is to mobilise deposits from the public. Depending upon the nature of deposits, funds deposited with bank also earn interest. Thus, deposits with the bank grow along with the interest earned. Some of the important deposit accounts are as given below.
Current Account: Current account is a type of deposit account that caters to the need of professionals and businessmen alike. These deposits are the most liquid deposits and there are no limits for numbers of transaction or amount of transactions in a day.
Saving Account: It is generally opened in bank by salaried persons or by the persons who have a fixed regular income. This facility is also given to students, senior citizens, pensioners and so on. The saving account holder is allowed to withdraw money from the account as and when required. The interest which is given on saving accounts is sometime attractive, but often nominal.

Fixed Account: A deposit of money that pays higher interest than a savings account, but imposes conditions on the amount, frequency, and/or period of withdrawals is called fixed account.
Difference between Savings Account and Current Account

Basis of Difference	Savings Account	Current Account
Purpose	To encourage saving	Many transaction
Ideal for	Salaried person	Business person
Minimum Amount	Less amount	Higher amount (depending on the bank)
Interest Rates	4% – 6%	Normally, no interest is paid
Overdraft	Not Allowed	Allowed

Cash Credit Account: It can be opened as per terms and conditions of sanction of given credit limits. The rules prescribed for the current accounts is applicable to Cash Credit accounts, in addition to the sanctioned terms and conditions.
Recurring Deposit Account: In banking terminology, the term recurring deposit refers to the periodic placement of a fixed sum of funds with a bank or financial institution into a special term account, with a specified tenure, generally between 1 and 5 years.
At the end of the tenure, the funds with accrued interest are typically withdrawn by the depositor.
To Lend Money: Another important function of a Commercial Bank is to grant loans and advances. Such loans and advances are given to the public and business community at a higher rate of interest than allowed by banks on various deposit accounts.Types of loans of commercial bank are given below
- Overdraft
- Debt and loan
- Retrenchment of exchange bills
- Cash credit
- Investment in public securities
Agency Functions: Agency functions include the following
- Collection of cheques, dividends and interests
- Payment of rent, insurance premiums
- Dealing in foreign exchange
- Purchase and sale of securities
- Act as trustee, executor, attorney, etc
- Act as correspondent
- Preparations of Income Tax returns
Miscellaneous Functions: Issuing letters of credit, travellers cheques, circular notes, etc.
- Undertaking safe custody of valuables, important documents and securities by providing safe deposit vaults or lockers.
- Underwriting of share, debentures, etc.
- Underwriting loans floated by government and public bodies.

Non Performing Asset (NPA)
It is a classification used by financial institutions that refers to loans that are in jeopardy of default. Once i the borrower has failed to make interest or principal payments for 90 days the loan is considered to be a non performing asset. (Also known as ‘non performing loan’.) Non performing assets are problematic for financial institutions since they depend on interest payments for income.

Private Banks
Private Banks are banks owned by either an individual or a general partner(s) with limited partner(s). But licence is provided by Reserve Bank of India.
Private Sector Banks

Bank	Place
Kotak Mahindra Bank, (1985)	Mumbai
ICICI Bank, (1994)	Vadodara
AXIS Bank, (1994) (UTI renamed in 30th July, 2007)	Ahmedabad
Indusland Bank, (199’4)	Pune
Global Trust Bank, (1994)	Secunderabad
HDFC Bank, (1995)	Mumbai
Times Bank, (1995)	Faridabad
Centurion Bank, (1995)	Panji
Bank of Punjab, (1995)	Chandigarh
Development Credit Bank Ltd. (1995)	Mumbai
Yes Bank, (2004)	Mumbai
Bandhan Bank, (2015)	Kolkata
IDFC Bank, (2015)	Mumbai

Types of Banks on the Basis of Function
Following are the types of banks classified on the basis of their functions.

Agricultural Banks
An agricultural bank may, in particular undertake the following types of business

granting short term credit to buy seeds, fertilizers and other inputs, and
granting long term credit to purchase land, to make permanent improvements on land, to purchase agricultural machinery and equipment, etc.

Post Office Saving Banks
It is a bank which accepts deposit of small amount only and provide the withdrawal facilities to their customers. ATM facility is also available in this bank.

Foreign Exchange Banks
Foreign Exchange Bank is the bank which is involved in sale and purchase of the foreign exchange bill and exchange of one currency for another or the conversion at one currency into another currency. The foreign exchange banks work through financial institutions and it operates on several levels. Behind the scenes banks turn to a smaller number of financial firms known as ‘dealers,’ who are actively involved in large quantities of foreign exchange trading. Payment of International Loans, Export-Import of securities and forward exchange trade are also done by these banks.

Foreign Banks
These banks are registered and have their headquarters in a foreign country but operate their branches in our country.

Important Foreign Bank in India
Name of Bank	Country of Incorporation
AB Bank Ltd.	Bangladesh
KBC Bank NV	Belgium
Industrial and Commercial Bank of China Ltd.	China
Deutsche Bank	Germany
HSBC Ltd	Hong Kong
The Royal Bank of Scotland NV	Netherlands
Doha Bank	Qatar
DBS Bank Ltd.	Singapore
Shinhan Bank	South Korea
Korea Exchange Bank	South Korea
Bank of Ceylon	Sri Lanka
UBS AG	Switzerland
Abu Dhabi Commercial Bank Ltd.	UAE
Barclays Bank Pic.	United Kingdom
Standard Chartered Bank	United Kingdom
American Express Banking Corporation	USA
Bank of America	USA

Co-operative Banks
Co-operative banks operate in both urban and rural areas. All banks registered under the Co-operative Societies Act, 1912 are considered co-operative banks.
Commercial banks, are driven by profit while co-operative banks work on a “no profit, no loss” basis. These are regulated by the Reserve Bank of India under the Banking Regulation Act, 1949 and Banking Laws (Application to Co-operative Societies) Act, 1965.
There are two types of co-operative banks.

State Co-operative Banks: SCBs mean the principal co-operative society in a state, the primary object of which is the financing of other co-operative societies in the state.
District/Central Urban Co-operative: Banks UCBs are registered under the Co-operative Societies Act of the respective State Governments. UCBs having a multi-state presence are registered under the Multi-State Co-operative Societies Act and are regulated by the Central Government.

Development Banks
Development banks are specialised financial institutions. To promote economic development, development banks provide medium term and long term loans to the entrepreneurs at relatively low rate of interest rates. Some examples of development banks in India are Industrial Development Banks of India (IDBI), Industrial Financial Corporation of India (IFCI), etc.

Retail Banks
A retail bank is a bank that works with customers, offering basic banking services. Examples include savings banks, savings and loan associations, and recurring and fixed deposits. Products and services include safe deposit boxes, checking and savings accounting, certificates of deposit (CDs), mortgages, personal, consumer and car loans.

Central Banks
Central banks are bankers’ banks. They guarantee stable monetary and financial policy from country to country and play an important role in the economy of the country. Typical functions include implementing monetary policy, managing foreign exchange and gold reserves, making decisions regarding official interest rates, acting as banker to the government and other banks, and regulating and supervising the banking industry. These banks buy government debt, have a monopoly on the issuance of paper money, and often act as a lender of last resort to commercial banks. It controls and coordinates currency and credit policies of any country. The Reserve Bank of India is the central bank of India.

Investment Banks
An investment bank is a financial institution that assists individuals, corporations and governments in raising capital by underwriting’and/or acting as the client’s agent in the issuance of securities. An investment bank may also assist companies involved in mergers and acquisitions, and provide ancillary services such as market making, trading of derivatives, fixed income instruments, foreign exchange, commodities, and equity securities. Investment banks aid companies in acquiring funds and they provide advice for a wide range of transactions.

Online Banks
Online banking gives you the ability to manage your money online – over the internet – so you do not have to visit a bank branch. Operate entirely online – there are no physical branch locations to talk with a teller or personal banker. Many brick-and-mortar banks also offer online services, such as the ability to view accounts and pay bills online, but internet only banks are different: they often offer competitive rates on saving accounts and they’re likely to offer free checking.

Types of Banking in India on the Basis of the Organisation

Branch Banking
Branch banking is the most common type of banking and still an integral part of Indian banking system as most Indians still believe in cash transactions and prefer to visit banks in person for routine banking operations. Banks branches are the face of the banks where customers can visit and talk to the officials for getting better insights into new policies, investment schemes, other banking services, etc.

Unit Banking
Unit banking, which originated in US, is a limited way of banking where banks operate only from a single branch (or a few branches in the same area) taking care of local community.

Mixed Banking
When the banks undertake activities of commercial and investment banking together; it is called mixed banking. Mixed banking promotes rapid industrialisation.

Chain Banking
Chain banking system is involved when a group of persons came together to own and control three or more independently chartered banks. Individuals secure enough stocks to get the controlling interest in the banking corporations involved. The management can also be established via a board of directors.

Wholesale Banking
Wholesale banking involves banking services for high net-worth clients like corporate, commercial banks, mid-size companies, etc. The services which come under the net of wholesale banking involves wholesaling, underwriting, market making, consultancy, mergers and acquisitions, joint ventures, fund management, etc.

Relationship Banking
Relationship banking involves going beyond the normal banking services and understanding customer’s needs before offering him any special product. The knowledge about existing and potential clients is essential for all banks.

Correspondent Banking
Correspondent banks are financial institutions that provide banking or financial services on behalf of other equal or unequal financial institution. These are used to conduct banking operations in foreign countries as the domestic banks have limited access to foreign markets and cannot directly reach clients. The services which come under the blanket of correspondent banking are cash/fund management; international fund transfers, clearance of cheques, drawing of demand drafts, etc.

Rural Banking
Rural banking has become integral to the Indian financial markets with a majority of Indian population still living in rural or semi-urban areas.

Universal Banking
Universal banking is a system of banking under which big banks undertake a variety of banking services like commercial banking, investment banking, mutual funds, merchant banking, insurance, etc. In simple words, Universal Banking means that Financial Institutions (FIs) and Banks are allowed to undertake all kinds of activity of banking, financing and related businesses.

Narrow Banking
The Narrow Banking is very much an antonym to the Universal Banking. Narrow Banking means Narrow in the sense of engagement of funds and not in activity. The Tarapore Committee had recommended that to bring down the Non Performing Assets (NPAs), the incremental sources of the banks (called narrow banks) should be restricted only to investments in Government Securities. Thus, Tarapore Committee is best known for giving Concept of Narrow Banking as a solution to the problem of Non Performing Assets.

Social Banking
The concept of social banking was to provide banking for the poor population, working for their developmental needs, providing them with easy formal credit, minimal requirements to open accounts, ease of access and friendly staff etc.

Virtual Banking
Virtual or internet banking is a system where all the transactions of the bank are done online and there are no physical branches of the banks.

India’s Key Banks

State Bank of India
On the recommendation of All India Rural Credit Survey Committee, Imperial Bank was nationalised to become State Bank of India on 1st July, 1955.

Shareholding
Government of India held around 62% equity shares in SBI. Over 800000 individual shareholders hold approx. 5.7% of its shares. Life Insurance Corporation of India is the largest non-promoter shareholder in the company with 10.9% shareholding.

Shareholders	Shareholding
Promoters Government of India	62.31%
Insurance Companies	11.90%
Foreign Institutional Investors	09.79%

Functions of State Bank of India
The functions of SBI can be grouped under two categories, viz., the Central banking functions and Ordinary banking functions. The SBI acts as an agent of the RBI at the places where the RBI has no branch. Accordingly, it renders the following functions

Banker to the government
Banker to banks in a limited way
Maintenance of currency chest
Acts as clearing house
Renders promotional functions

General/Ordinary Banking Functions
Besides the above specialised functions, the SBI renders the following functions

Accepting deposits from the public under current, savings, fixed and recurring deposit accounts.
Advancing and lending money and opening cash credits upon the security of stocks, securities, etc.
Drawing, accepting, discounting, buying and selling of bills of exchange and other negotiable instruments.
Investing funds, in specified kinds of securities.
Advancing and lending money to court of wards with the previous approval of State Government.
Issuing and circulating letters of credit, etc.
The State Bank may (with the sanction of the Central Government) enter into negotiations for acquiring the business of any other Banking Institutions.

SBI Agriculture Loan
SBI provides SBI Agriculture loan (term loan) for asset (bullocks, farm machinery, sheep, etc.) purchase as well as asset creation (poultry, orchard development, dairy development, etc.) which are connected with activities in rural areas.
The rate of interest varies from 8.5% to 12.75% depending on the loan amount and in the extreme cases of very high loan amounts, credit risk assessment is required. Repayment period varies from 5-15 years and is based on the income generation of activity for which loan was taken

Merging of SBI and Mahila Bank
The Union Cabinet, on 15th June, 2016, approved the merger of five associate banks as well as Bharatiya Mahila Bank with State Bank of India. It is the first move to consolidate the country’s struggling Public Sector Banks. The country’s largest lender, State Bank of India (SBI), has decided to merge its five associate Public Sector Banks (PSBs) and the Bharatiya Mahila Bank (BMB) with itself.
In this regard, the SBI has informed the Bombay Stock Exchange (BSE) that it is seeking in-principle approval for acquistior from the Union government.

5 subsidiary banks are

State Bank of Bikaner & Jaipur (founded in 1943)
State Bank of Hyderabad (founded in 1941)
State Bank of Mysore (founded in 1913)
State Bank of Patiala (founded in 1917)
State Bank of Travancore (founded in 1945)

Associate Banks of SBI and their Merger
In 1959, the government passed the State Bank of India (Subsidiary Banks) Act. Under this Act, 8 SBI subsidiaries were made. Three of them had already merged with SBI. State Bank of Saurashtra, State Bank of Indore (founded in 1920). In 1963, SBI merged State Bank of Jaipur (founded in 1943) and State Bank of Bikaner (founded in 1944) to form State Bank of Bikaner and Jaipur. State Bank of Saurshtra merged with SBI in 2008. Then in 2010, the State Bank of Indore (founded in 1920) also merged with SBI leaving the associate banks of SBI to 5 in number.
At present, the SBI has 14 regional hubs and 57 Zonal Offices that are located at important cities throughout India. It has more than 17000 branches in India presently, of which 9851 (66%) are in Rural and Semi-urban areas. It has 190 overseas branches spread over 36 countries.

Other Important Banks in India

United Bank of India

Headquarters: Kolkata, West Bengal, India
Founded: 1950, India
Nationalisation: 1969
Punch Line: The Bank that begins with ‘U’
Regional Rural Bank sponsored by UBI are:

Tripura Gramin Bank
Assam Gramin Vikash Bank
Bangiya Gramin Vikash Bank
Manipur Rural Bank

UCO Bank

Headquarters: Kolkata
Founded: 6 jauanry, 1943
Nationalisation: 1969
Punch Line: Honors Your Trust
Regional Rural Bank sponsored by UCO Bank are

Bihar Kalpatharu Gramin Bank
Jaipur Thar Gramin Bank
Kalinga Gramin Bank
Mahakaushal Kshetriya Gramin Bank
Paschim Banga Gramin Bank

Union Bank of India

Headquarters: Mumbai
Founded: 11 November, 1919
Nationalisation: 1969
Punch Line: Good People to Bank With
Regional Rural Bank sponsored by Union Bank are

Rewa Sidhi Gramin Bank
Kashi Gomti Samyut Gramin Bank

Central Bank of India

Headquarters: Mumbai
Founded: 21 Decembar, 1911
Nationalisation: 1969
Punch Line: Build A Better Life Around Us
Regional Rural Bank sponsored by CBI are

Ballia Etawah Gramin Bank
Satpura Narmada Kshetriya Gramin Bank
Surguja Kshetriya Gramin Bank
Uttar Banga Kshetriya Gramin Bank
Uttar Bihar Gramin Bank
Vidharha Kshetriya Gramin Bank
Hadoti Kshetriya Gramin Bank .

Allahabad Bank of India

Headquarters: Kolkata
Founded: 1865
Nationalisation: 1969
Punch Line: Tradition of Trust
Regional Rural Bank sponsored by Allahabad Bank are

Sharda Gramin Bank
Allahabad UP Gramin Bank

Andhra Bank

Headquarters: Hyderabad
Founded: 20 November, 1923
Nationalisation: 1980
Punch Line: Much More to do with You in Focus
Regional Rural Bank sponsored by Andhra Bank are

Chhattisgarh Gramin Bank
Rushikulya Gramin Bank

Bank of Baroda

Headquarters: Baroda
Founded: 20 July, 1908
Nationalisation: 1969
Punch Line: India’s International Bank
Regional Rural Bank sponsored by Bank of Baroda are

Nainital Almora Kshetriya Bank
Baroda Gujarat Gramin Bank
Baroda UP Gramin Bank
Baroda Rajasthan Gramin Bank
Jhabua Dhar Kshetriya Gramin Bank

Bank of India

Headquarters: Mumbai
Founded: 7 September, 1906
Nationalisation: 1969
Punch Line: Relationships Beyond Banking
Regional Rural Bank sponsored by Bank of India are

Narmada Malwa Gramin Bank
Wainganga Krishna Gramin Bank
Aryavat Gramin Bank

Bank of Maharashtra

Headquarters: Pune
Founded: 16 September, 1935
Nationalisation: 1969
Punch Line: One Family One Bank
Regional Rural Bank sponsored by Bank of Maharashtra is

Maharashtra Gramin Bank

Canara Bank

Headquarters:   Bengaluru
Founded:   1906
Nationalisation:  4969
Punch Line: It’s easy to Change for those who you love; Together we can
Regional Rural Bank sponsored by Canara Bank are

Shreyas Gramin Bank
South Malabar Gramin Bank

Indian Bank

Headquarters: Chennai
Founded: 5 March, 1907
Nationalisation: 1969
Punch Line: Taking Banking Technology to Common man, your tech-friendly bank
Regional Rural Bank sponsored by Indian Bank are

Pallavan Grama Bank
Puduvai Bharthiar Grama Bank
Saptagiri Gramin Bank

Corporation Bank

Headquarters: Mangalor
Founded: 12 March, 1906
Nationalisation: 1980
Punch Line: Prosperity for All
Regional Rural Bank sponsored by Corporation Bank is

Chikmagalur Kodagu Gramin Bank

Dena Bank

Headquarters: Mumbai
Founded: 26 May, 1938
Nationalisation: 1969
Punch Line: Bank sponsored by Dena Bank arc
Regional Rural Bank sponsored by Dena Bank are

Dena Gujarat Gramin Bank
Durg Rajnadgaon Gramin Bank

Punjab National Bank

Headquarters: New Delhi
Founded: 1895
Nationalisation: 1969
Punch Line: The Name you can Bank Upon
Regional Rural Bank sponsored by PNB are

Punjab Gramin Bank
Rajasthan Gramin Bank
Sarva UP Gramin Bank
Haryana Gramin Bank » Himachal Gramin Bank
Madhya Bihar Gramin Bank

Indian Overseas Bank

Headquarters: Chennai
Founded: 1937
Nationalisation: 1969
Punch Line: Good People to Grow -with
Regional Rural Bank sponsored by Overseas Bank are

Neelachal Gramin Bank
Pandyan Gramin Bank

Oriental Bank of Commerce

Headquarters: New Delhi
Founded: 1943
Nationalisation: 1980
Punch Line: Where Every Individual is Committed

Punjab and Sindh Bank

Headquarters: New Delhi
Founded: 24 June,1908
Nationalisation: 1980
Punch Line: Where Service is a Way of Life
Regional Rural Bank sponsored by PSB is – Sutlej Gramin

Vijaya Bank

Headquarters: Bengaluru
Founded: 1931
Nationalisation: 1980
Punch Line: A Friend you can Bank Upon
Regional Rural Bank sponsored by Vijaya Bank is

visveshvaraya Gramin Bank

Syndicate Bank

Headquarters: Manipal
Founded: 1925
Nationalisation: 1969
Punch Line: Yaur Faithful and Friendly Financial Partner
Regional Rural Bank sponsored by Syndicate Bank are

Andhra Pragathi Gramin Bank
Gurgaon Gramin Bank
Karnataka Vikas Gramin Bank

IDBI Bank

Headquarters: Mumbai
Founded: July, 1964
Punch Line: Banking for all, not just for big boys, Aao Sochein Bada.

In September 2004, the Reserve Bank of India incorporated IDBI as a ‘scheduled bank’ under the RBI Act, 1934.

Bharatiya Mahila Bank

Headquarters: New Delhi, India
Founded: 19 November, 1913
Punch Line: Empowering Women, Empowering India

State Ownership Bank

Question Bank

1. Which one of the following banks can be included in the Scheduled Commercial Banking System of India?

Regional Rural Banks
Private Sector Banks
Foreign Banks in India
All of the above
None of the above

2. Which of the following Public Sector Bank’s emblem figures a dog and the words ‘faithful friendly’ in it?

Punjab National Bank
Syndicate Bank
Oriental Bank of India
State Bank of India
Central Bank of India

3. In India, the first bank of limited liabilities managed by Indians and founded in 1881 was

Hindustan Commercial Bank
Oudh Commercial Bank
Punjab National Bank
Punjab and Sind Bank
National Bank

4. How many banks were first nationalised?

5. When was the second phase of nationalisation done?

9th July, 1969
10th July, 1968
16th August, 1985
15th April, 1980
None of these

6. How many banks were there in second phase of nationalisation?

7. Who will act as the banker to the Government of India?

State Bank of India
Reserve Bank of India
NABARD
Nationalised Banks
Central Bank of India

8. ‘Good people to grow with’ is the tagline of

Punjab National Bank
Indian Overseas Bank
Oriental Bank of Commerce
Union Bank of India
UCO Bank

9. The second phase of bank nationalisation took place in 1980 during the prime ministerial tenure of Indira Gandhi. Which bank was nationalised in this period?

Indian Overseas Bank
Central Bank of India
Canara Bank
Vijaya Bank
Dena Bank

10. Where is the headquarter of Reserve Bank of India?

Mumbai
Delhi
Kolkata
Ahmedabad
Noida

11. A scheduled bank is the one which is included in the

II Schedule of Banking Regulation Act
II Schedule of Constitution
II Schedule of RBI Act
None of the above
All of the above

12. What is the animal of the insignia of the RBI?

Lion
Tiger
Panther
Elephant
Horse

13. Which of the following Indian Banks is not a Nationalised Bank?

Corporation Bank
Dena Bank
Federal Bank
Vijaya Bank
Oriental Bank of Commerce

14. Choose the one which is incorrectly matched.

Allahabad Bank-A Tradition of Trust
Andhra Bank-Where India Banks
Bank of Baroda-Hum Hai Na, Khyal Apka
Bank of India-Relationship beyond banking
Bhartiya Mahila Bank-Empowering Women

15. Who regulates the money circulation in India?

State Bank of India
Reserve Bank of India
NABARD
Commercial Banks
None of the above

16. Which of the following is not an organised sector in India?

Nationalised Banks
Regional Rural Banks
Cooperative Banks
Chits and Money Lenders
Industrial Bank

17. Who will settle the grievances of customers of banks?

Reserve Bank of India
State Bank of India
Local Courts
Ombudsman
Governor of RBI

18. Who introduced the Banking Ombudsman Scheme?

RBI
SBI
Ministry of Finance
NABARD
None of these

19. When was Ombudsman Scheme first introduced?

November, 2006
October, 1981
June, 1995
January, 1998
All of these

20. Which was the first Bank corporated by the Indians? (1881)

Imperial Bank of India
State Bank of India
Avadh Commercial Bank
Reserve Bank of India
National Bank

21. When was Reserve Bank of India established?

1920
1925
1935
1948
1968

22. When was Reserve Bank of India Nationalised?

1947
1948
1949
1950
1960

23. When did Indian Banking Act come into force?

1948
1949
1950
1951
1940

24. Imperial Banks were amalgamated and changed as…..

Reserve Bank of India
State Bank of India
Subsidiary Banks
Union Bank of India
Corporation Bank

25. When was Imperial Bank changed as State Bank of India?

1st January, 1935
26th February, 1947
1st July, 1955
1st July, 1959
26th February, 1955

26. How many banks which were nationalised in 1980’s are currently working?

27. The first wholly Indian Bank was setup in

1794
1894
1896
1902
1918

28. Traveller’s cheques are valid for…….

Three months
Six months
One year _t
No limit are valid till encashed
None of the above

29. When was HDFC bank established?

1935
1969
1975
1995
2014

30. Presently, the number of the public sector banks in India is

8
20
28
14
None of these

31. Which of the following is popular ‘saving bank’ among the poor children?

Core banking
Credit banking
Debit banking
Merchant banking
Piggy banking

32. The origin of the State Bank of India goes back to the first decade of the 19th century with the establishment of

Bank of Calcutta
Bank of Bengal
Bank of Bombay
Bank of Madras
None of these

33. Which bank came into existence in 1921 when three banks namely, Bank of Bengal (1806), Bank of Bombay (1840) and Bank of Madras (1843) were reorganised and amalgamated to form a single banking entity?

Imperial Bank of India
State Bank of India
Reserve Bank of India
Punjab National Bank
None of the above

34. The Bank of India was constituted on

1911
1949
1955
1956
None of these

35. The government passed the State Bank of India (Subsidiary Banks) Act in

1934
1949
1955
1959
None of these

36. Which bank became the State Bank of India in 1955?

General Bank of India
Bank of Hindustan
Imperial Bank of India
Federal Bank of India
None of the above

37. SBI day is observed on

1st January
1st April
1st July
1st August
None of these

38. SBI Act was passed in Parliament in

1935
1949
1955
1969
1980

39. Generally, the minimum rate below which the banks do not lend is known as

floor rate
repo rate
highest rate
base rate
All of these

40. Which of the following banks has acquired the title ‘Centurion Bank of Punjab’?

ICICI Bank
IDBI Bank
HDFC Bank
AXIS Bank
None of these

41.What was the deposits criteria of 14 banks nationalised on 19th July, 1969?

Rs 1000 crore
Rs 500 crore
Rs 100 crore
Rs 50 crore
None of these

42. Board for Financial Supervision (BFS) was constituted in 1994 by RBI to undertake consolidated supervision of

commercial banks
financial institutions
non-banking finance companies
None of the above
AH of the above

43. Who is a very senior citizen?

A person who is 65 yr and above
A person who is 75 yr and above
A person who is 80 yr and above
A person who is 90 yr and above
A person who completed 100 yr of age

44. The first nationalisation of banks exercise was done on

19th June, 1969
19th June, 1970
19th June, 1967
15th July, 1967
None of these

45. Kotak Mahindra Bank merged with……… bank in 2014.

ING Vyasa Bank
IDBI £td.
Bank of Rajasthan
Bank of Punjab Ltd.
AXIS Bank

46. In the year 1980, the second phase of nationalisation of Indian banks took place. Choose the correct statement.

7 more banks were nationalised with deposits over 200 crores.
The Government of India held a control over 91% of the banking industry in India.
After the nationalisation of banks there was a huge jump in the deposits and advances with the banks.
All of the above
None of the above

47. Which bank is called Apex Bank?

Development Bank of India
NABARD
Reserve Bank of India
SBI
EXIM Bank

48. First Indian appointed as the Governor of Reserve bank of India………….

Sir C D Deshmukh
Sir Senegal Rama Rau
M Narasimham
Dr C Rangarajan
Shanmugam Chettiar

49. Which bank is not in Private Sector?

AXIS Bank
ICICI Bank
Repco Bank
HDFC Bank
South Indian Bank Ltd

50. Tagline of’Bank of India

Relationship beyond banking
One family one bank
A Premiere Public Sector Bank
Trusted Family Bank
Where India Banks

51. Consider the following statements regarding Bank of Baroda.
I. The bank was founded by the Maharaja of Baroda, Maharaja Sayajirao Gaekwad III on 20th July, 1908.
II. Headquarter of BoB in Vadodara (earlier known as Baroda), Gujarat.
III. It was nationalised on 19th July, 1969. Codes

I and II
II and III
I and III
I, II and III
Only III

52. Canara Bank sponsors regional rural banks (RRB)
I. Kerala Gramin Bank
II. Pragathi Krishna Gramin Bank
III. Kerala Bank of rural
Codes

I and II
II and III
I and III
III and III
Only III

53. Which of the following statements is/are correct?
I. Corporation Bank is a public sector banking company headquartered in Mangalore, India.
II. Corporation Bank completed hundred and ten years of existence on 12th March, 2015.
III. The bank was nationalised in 1969.
Codes

I and II
II and III
I and III
I, II and III
Only III

54. Consider the following statements regarding Co-operative bank.
I. These banks are controlled, owned, managed and operated by co-operative societies.
II. Came into existence under the Co-operative Societies Act in 1912.
III. These banks are located in the urban as well in the rural areas.
Codes

I and H
II and III
I, n and m
I and III
Only III

55. Consider the following statements.
I. In Indian Commercial Banking System, the number of the Non-Scheduled Bank is more than the Scheduled Banks.
II. The Non-Scheduled Banks in Indian Commercial Banking System are even less than a dozen in number.
III. Which of the statement(s) given above is/are correct?

Only I
Only II
Both I and II
Neither I nor II
Can’t say

56. Consider the following statements.
I. Scheduled Commercial Banks are those which have been included in the First Scheduled of RBI Act, 1934.
II. Non-Scheduled Commercial Banks are those which have been included in the Second Scheduled of RBI Act, 1934.
III. Which of the statement(s) given above is/are correct?

Only I
Only II
Both I and II
Neither I nor II
Can’t say

57. Consider the following statements.
I. Allahabad Bank was the first bank to be established exclusively by Indians.
II. Seven banks forming subsidiary of State Bank of India was nationalised in 1960.
III. Which of the statements) given above is/are correct?

Only I
Only II
Both I and II
Neither I nor II
Can’t say

58. Consider the following statements regarding Indian Overseas Bank (IOB).
I. It is a major public sector bank based in Chennai (Madras).
II. In 1937, Thiru.M. Ct. M. Chidambaram Chettyar established the Indian Overseas Bank (IOB).
III. Good people to grow with is the tagline of this bank.
Codes

I and II
II and IH
I, n and III
I and in
Only III

59. Which of the following statements is/are correct?
I. On 19th July 1960, SBI’s seven subsidiaries were nationalised with deposits over 200 crores.
II. The major nationalisation of banks happened in 1969 by the then Prime Minister Indira Gandhi.
III. The major objective behind nationalisation was to spread banking infrastructure in rural areas make cheap finance available to Indian farmers.
Codes

I and II
II and III
I and III
I, II and III
Only III

60. Who amongst the following persons is a Former Governor of RBI? [SBI Clerk 2012]

Shri P Chidambaram
Shri Yashwant Sinha
Shri Pranab Mukherjee
Shri Manmohan Singh
None of the above

61. Who is the 22nd Governor of Reserve Bank of India? [SBI Clerk 2012]

Dr K C Chakrabarty
Dr D Subbarao
Dr VY Reddy
Dr S Gokarn
None of these

62. Which of the following is not a public sector bank? [SBI Clerk 2012]

Corporation Bank
United Bank of India
Vijaya Bank
Bank of Maharashtra
Federal Bank

63. The Reserve Bank of India Act, 1934 extends to [RBI Assistant 2013]

whole of India
whole of India except the State of Jammu and Kashmir
whole of India except the State of Jammu and Kashmir and Sikkim
whole of India except the State of Jammu and Kashmir, Sikkim and Nagaland
None of the above

64. Which of the following statement is correct? [RBI Assistant 2013]

The Central Bank is inspired by the spirit of national welfare
The Central Bank is inspired exclusively by the profit-motive
The Central Bank is inspired by the new technology
All of the above
None of the above

65. The Reserve Bank of India is [RBI Assistant 2013]

a department of Central Government under Ministry of Finance
a body corporate, having perpetual succession and a common seal
an institution owned by Indian Banks’ Association
All of the above
None of the above

66. The earliest attempt to set up in India a banking institution with some characteristics of central bank dates back to January, 1773 when Warren Hastings, Governor of Bengal (later Governor General) recommended the establishment of [RBI Assistant 2013]

Presidency Bank
Reserve Bank of India
Imperial Bank of India
General Bank of Bengal and Bihar
None of the above

67. The Reserve Bank of India, which was established under the Reserve Bank of India Act, 1934, started functioning from [RBI Assistant 2013]

1st April, 1934
1st April, 1935
1st Sep, 1934
1st July, 1934
1st April, 1936

68. ‘National Institute of Bank Management’ is the institution meant for [SBI Clerk 2014]

All those given as options
providing management personnel to the banks
training of bank employees in banking
providing consultancy on best practices in bank management
recruitment of bank employees at all levels

69. Who inaugurated the Bharatiya Mahila Bank? [SBI Clerk 2014]

Sonia Gandhi
P Chidambaram
Manmohan Singh
D Subbarao
None of the above

70. AXIS Bank was formerly known as [SBI Clerk 2014]

YES Bank
UTI Bank
City Union Bank
HDFC Bank
Centurian Bank

71. Which of the following institutions has recently been allowed mandate for grant of Banking licence by the RBI? [SBI Clerk 2014]

Bandhan Finance
IDFC
LIC Housing
L and T Finance
M and M Finance

72. Central Bank of India headquarter is established in [IBPS PO 2015]

Mumbai
Kolkata
Patna
Chennai
Hyderabad

73. Indian Bank Association headquarter is established in [IBPS Clerk 2015]

Mumbai
Hyderabad
Chennai
Kolkata
Pune

74. IDFC was incorporated on 30th Jan, 1997 with its registered office in [IBPS Clerk 2015]

Chennai
Bengaluru
Kolkata
Mumbai
Hyderabad

75. As per the recent press reports, RBI has recently conveyed the ‘in-principle’ approval to open new bank. Which of the following entity has received the permission? [IBPS Clerk 2015]

Tata Group
LIC Housing Finance
Anil Ambani Group ,
Videocon Group
IDFC

76. The private sector banking space witnessed its first consolidation move in four years. Which of the following bank merger took place recently? [IBPS Clerk 2015]

United Western Bank and IDBI Bank
Ganesh Bank of Kurundwad and Federal Bank
ING Vysya Bank and Kotak Mahindra Bank
Bank of Rajasthan and ICICI Bank
State Bank of Indore and State Bank of India

77. IDBI headquarter is established in [IBPS Clerk 2015; SBI Clerk 2016]

Hyderabad
Chennai
Bengaluru
Kolkata
Mumbai

78. Union Bank of India is one of the major public sector banks in India. It is headquartered in [RBI Grade B 2015]

Mumbai
Bengaluru
New Delhi
Chennai
Kolkata

79. Which of the following former Governors of the Reserve Bank of India has also served as ‘ the Union Finance Minister?[RBI Grade B 2015]

Dr C Rangarajan
LK Jha
B Venkitaraman
Dr IG Patel
CD Deshmukh

80. Which of the following public sector banks has headquarter in Chennai? [SBI PO 2016]

Central Bank of India
Corporation Bank
Punjab National Bank
Indian Bank
Dena Bank

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