Banking basics and financial institutions - Question Bank

1. What is 'Sub-prime lending'?
A) Lending to borrowers with excellent credit history
B) Lending to borrowers with a poor credit history, who are at a higher risk of default
C) Lending by the central bank to commercial banks
D) Lending for education purposes
2. What is the role of the 'Discount and Finance House of India' (DFHI)?
A) To provide long-term industrial finance
B) To deal in money market instruments and provide liquidity
C) To regulate insurance companies
D) To manage the country's gold reserves
3. What is the primary function of a 'Mutual Fund'?
A) To provide direct loans to individuals
B) To pool money from investors to invest in securities like stocks, bonds, and money market instruments
C) To issue new currency
D) To regulate the banking sector
4. What is 'Credit Default Swap' (CDS)?
A) A type of loan offered by banks
B) A financial derivative that allows an investor to 'swap' or offset their credit risk with that of the borrower
C) A government bond issued for infrastructure projects
D) A tool for managing foreign exchange rates
5. Which of the following is a role of the 'Securities Appellate Tribunal' (SAT)?
A) To regulate banks
B) To hear appeals against orders passed by SEBI or other regulatory bodies
C) To manage foreign exchange reserves
D) To issue new currency
6. What is a 'Certificate of Deposit' (CD)?
A) A loan given by a bank
B) A negotiable, short-term instrument issued by banks
C) A type of government bond
D) A cheque issued by a company
7. What is the main purpose of 'Know Your Customer' (KYC) norms?
A) To increase the number of bank accounts
B) To prevent money laundering and terrorist financing
C) To offer higher interest rates
D) To simplify loan application processes
8. Which type of bank is primarily owned and controlled by its members?
A) Public Sector Bank
B) Private Sector Bank
C) Cooperative Bank
D) Foreign Bank
9. What is 'Securitization' in finance?
A) The process of creating new types of loans
B) The process of pooling various types of contractual debt and selling their related cash flows to third-party investors
C) The regulation of interest rates by the central bank
D) The merger of two banks
10. What is the role of the 'International Monetary Fund' (IMF)?
A) To provide development loans for infrastructure
B) To promote international monetary cooperation and financial stability
C) To regulate trade between countries
D) To manage the world's gold reserves
11. What is 'Interest Rate Risk' in banking?
A) The risk of losing money due to fluctuations in interest rates
B) The risk of a borrower defaulting on a loan
C) The risk of cyber-attacks on banking systems
D) The risk of foreign exchange rate fluctuations
12. Which of the following is a function of the World Bank?
A) Setting global interest rates
B) Providing loans and grants for development projects
C) Printing international currency
D) Regulating global stock markets
13. What is a 'Zero Balance Account'?
A) An account with a minimum balance requirement
B) An account that requires no minimum balance to be maintained
C) An account exclusively for government transactions
D) An account with a very high interest rate
14. What is the objective of the 'Priority Sector Lending' norm?
A) To encourage lending to large corporations
B) To ensure banks lend a certain portion of their credit to specific sectors like agriculture and MSMEs
C) To restrict lending to foreign companies
D) To promote lending only for real estate
15. Which of the following is a private sector bank in India?
A) Bank of Baroda
B) Canara Bank
C) Kotak Mahindra Bank
D) Union Bank of India
16. What is meant by 'Disintermediation' in finance?
A) The process of banks lending more
B) The process of financial flows bypassing traditional intermediaries
C) The introduction of new financial products
D) The regulation of interest rates
17. What is the primary purpose of a 'Credit Rating Agency'?
A) To provide loans to individuals
B) To assess and rate the creditworthiness of borrowers
C) To manage stock market investments
D) To print currency notes
18. Which institution is responsible for regulating the pension sector in India?
A) SEBI
B) IRDAI
C) RBI
D) PFRDA
19. What is a 'Call Money Market'?
A) A market for short-term loans between banks
B) A market for long-term industrial loans
C) A market for trading shares
D) A market for foreign currency exchange
20. What is the role of the 'Deposits Insurance and Credit Guarantee Corporation' (DICGC)?
A) To insure bank deposits and guarantee credit facilities
B) To regulate foreign exchange
C) To manage government securities
D) To provide loans to farmers
21. Which of the following is NOT a type of financial institution?
A) Commercial Bank
B) Stock Exchange
C) Manufacturing Company
D) Insurance Company
22. What does 'Basel Norms' relate to in banking?
A) Customer service standards
B) Capital adequacy and banking supervision
C) Interest rate determination
D) Branch network expansion
23. What is the function of a 'Development Financial Institution' (DFI)?
A) To provide short-term working capital
B) To offer retail banking services
C) To finance long-term infrastructure and industrial projects
D) To manage daily stock market transactions
24. Which of the following is a cooperative bank?
A) State Bank of India
B) Canara Bank
C) Cosmos Cooperative Bank
D) Axis Bank
25. What is the meaning of 'LTV ratio' in the context of loans?
A) Loan to Value ratio
B) Long-Term Velocity
C) Lending Transaction Volume
D) Loan Tenure Variability
26. What is the primary role of EXIM Bank?
A) To finance and facilitate India's export and import trade
B) To regulate the banking sector
C) To provide agricultural loans
D) To manage the nation's gold reserves
27. Which of the following is a feature of a 'Payment Bank'?
A) Can accept long-term deposits
B) Can issue credit cards
C) Accepts demand deposits and offers payment services
D) Provides loans to businesses
28. What does 'NPAs' (Non-Performing Assets) refer to in banking?
A) Loans that are performing exceptionally well
B) Loans on which interest or principal repayment is overdue
C) Assets owned by the bank that are not in use
D) Deposits held by the bank
29. Which entity is responsible for regulating the securities market in India?
A) RBI
B) SEBI
C) IRDAI
D) PFRDA
30. What is 'Monetary Policy'?
A) Government's policy on taxation and expenditure
B) Central bank's actions to manage money supply and credit conditions
C) Policies related to international trade
D) Regulations governing the stock market
31. What is the main objective of 'Financial Inclusion'?
A) To increase the number of ATMs
B) To ensure access to basic financial services for all
C) To promote only digital transactions
D) To reduce the number of bank branches
32. Which of the following is a type of public sector bank in India?
A) HDFC Bank
B) ICICI Bank
C) Punjab National Bank
D) Axis Bank
33. What is the purpose of 'Fiscal Policy'?
A) To manage the money supply
B) To influence the economy through government spending and taxation
C) To regulate stock markets
D) To control international trade agreements
34. Which institution is responsible for the regulation and supervision of the insurance sector in India?
A) SEBI
B) IRDAI
C) RBI
D) PFRDA
35. What is 'Reverse Repo Rate'?
A) The rate at which commercial banks lend to the public
B) The rate at which the central bank borrows from commercial banks
C) The rate at which commercial banks lend to each other
D) The rate at which the public deposits money in banks
36. What is the primary function of SIDBI?
A) To provide loans for small and medium enterprises (SMEs)
B) To regulate the stock exchange
C) To manage the gold reserves of the country
D) To provide insurance services
37. Which of the following is a non-banking financial company (NBFC)?
A) A commercial bank
B) A cooperative bank
C) A company engaged in financial activities but without a banking license
D) The central bank
38. What is meant by 'SLR' (Statutory Liquidity Ratio)?
A) The percentage of total deposits that banks must maintain as liquid assets
B) The percentage of profits that banks must reserve
C) The minimum capital a bank must hold
D) The maximum interest rate banks can charge
39. What is the primary role of NABARD?
A) Regulating commercial banks
B) Providing refinance for agriculture and rural development
C) Managing foreign exchange
D) Facilitating international trade finance
40. Which of the following is a tool used by the RBI to control inflation?
A) Increasing government spending
B) Decreasing the repo rate
C) Increasing the cash reserve ratio
D) Reducing taxes
41. What does 'CRR' stand for in banking terminology?
A) Credit Reserve Ratio
B) Cash Reserve Ratio
C) Capital Requirement Ratio
D) Customer Retention Ratio
42. Which type of bank operates with the objective of providing financial services to underserved segments of the population?
A) Cooperative Banks
B) Small Finance Banks
C) Foreign Banks
D) Universal Banks
43. What is the purpose of 'Open Market Operations' conducted by the RBI?
A) To regulate the stock market
B) To inject or absorb liquidity in the banking system
C) To control inflation through direct price controls
D) To issue new government bonds
44. Which financial institution primarily focuses on providing long-term finance for industrial development in India?
A) Regional Rural Banks
B) Small Finance Banks
C) Industrial Finance Corporation of India (IFCI)
D) Payment Banks
45. What is 'Bank Rate'?
A) The interest rate on loans to the public
B) The interest rate at which the central bank buys commercial bills
C) The rate at which commercial banks lend to each other
D) The rate charged by banks on overdrafts
46. What is the main objective of a 'Scheduled Bank'?
A) To operate only in rural areas
B) To be listed in the Second Schedule of the RBI Act
C) To exclusively deal with government accounts
D) To offer only long-term loans
47. Which of the following is NOT a function of the Reserve Bank of India?
A) Issuing currency
B) Controlling credit
C) Managing foreign exchange reserves
D) Providing banking services to the general public
48. What does 'repo rate' signify in monetary policy?
A) The rate at which commercial banks lend to the public
B) The rate at which the central bank lends to commercial banks
C) The rate at which commercial banks lend to each other
D) The rate at which the public deposits money in banks
49. Which institution is known as the central bank of India?
A) State Bank of India
B) Reserve Bank of India
C) National Bank for Agriculture and Rural Development
D) Industrial Development Bank of India
50. What is the primary function of a commercial bank?
A) To regulate monetary policy
B) To accept deposits and grant loans
C) To print currency
D) To manage government debt
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