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

The correct answer is 6.

Key Points

• Six Indian banks were nationalized on 15^th April 1980.
• Nationalization is the transfer of ownership and management of an undertaking from private hands to the states.
• Banks were nationalized in India through an ordinance passed in the year 1969.
• Indira Gandhi was the prime minister who nationalized banks in India.
• The first nationalization of banks took place on 19^th July 1969.
  • 14 banks were nationalized in 1969.
  • It was based on the banks whose deposit exceeds Rs. 50 crores.
• The second time government nationalized banks on 15^th April 1980.
  • 6 banks were nationalized in 1980.
  • It was based on the banks whose deposit exceeds Rs. 200 crores.

Mistake Points

• Most of the nationalized banks in India are also referred to as 'public sector banks'.
• After the merger of many banks, currently there are a total of 12 public sector banks in India including the State Bank of India (based on the RBI official website).

The correct answer is 3 is correct.

In News

• Floating rate savings bonds have adjustable interest rates based on a benchmark, and the interest rates fluctuate, providing investors with varying payments over time.

Key Points

• Statement 1: Floating rate savings bonds feature interest rates that adjust periodically based on benchmark rates, which means interest payments can fluctuate over time.
• Statement 2: These bonds are indeed government-backed, making them low-risk investments, which is another key feature.
• Statement 3: This statement is incorrect because floating rate savings bonds do not have fixed interest payments; the interest payments fluctuate depending on the benchmark rate.
• Statement 4: The investment period or tenure for these bonds remains fixed, despite changes in the interest rates.

Additional Information

• Floating Rate Savings Bonds
  • These bonds are unique in that they offer interest rates that are subject to change based on fluctuations in market conditions, usually tied to a government benchmark rate.
• Interest Payments
  • Unlike fixed-rate bonds, floating rate savings bonds provide interest payments that can increase or decrease over time, which can be advantageous in fluctuating interest rate environments.
• Fixed Tenure
  • The tenure for floating rate savings bonds is fixed, and while the interest rate changes, the maturity period does not, which provides stability for the investor.

The correct answer is SARFAESI Act - 2005.Key Points

• Statement 1: The Debt Recovery Tribunals (DRTs) were established in 1993, aimed at resolving the problem of Non-Performing Assets (NPAs) by enabling quick recovery of dues through specialized tribunals.
• Statement 2: The SARFAESI Act, introduced in 2002, allows banks to take possession of securities to recover dues from defaulting borrowers. This act provides the legal framework for securing and recovering NPAs.
• Statement 3: The Insolvency and Bankruptcy Code (IBC) was enacted in 2016, providing a uniform legal framework for insolvency resolution, and to improve the recovery process for creditors.
• Statement 4: The National Asset Reconstruction Company Limited (NARCL) was formed in 2021 as an initiative to clean up bad loans by acquiring bad assets from banks.

Additional Information

• Debt Recovery Tribunals (DRTs)
  • DRTs were established to provide speedy recovery of bad loans by enabling the banks to initiate actions to recover the loans from defaulters.
• SARFAESI Act
  • The SARFAESI Act empowers banks to take possession of assets and sell them to recover dues from borrowers in default without the intervention of courts.
• IBC (Insolvency and Bankruptcy Code)
  • The IBC provides a comprehensive legal framework for the resolution of insolvency cases, addressing the issue of delayed payments and NPAs in India.
• NARCL (National Asset Reconstruction Company Ltd.)
  • The NARCL was set up to acquire bad loans from banks and provide a mechanism for restructuring them and finding solutions to reduce the NPA burden in the banking sector.

The correct answer is Only Statement I and IV are correct.

In News

• The Environmental Performance Index (EPI) ranks countries based on their environmental health and sustainability efforts, and India's EPI ranking raises concerns about its environmental policies and practices.

Key Points

• Statement I: Countries ranked below India in the EPI are not all developed nations with high environmental standards. In fact, many developing nations also rank below India, with challenges similar to India’s in terms of environmental practices.
• Statement II: The countries ranked below India in the EPI do not necessarily have stronger air quality regulations. Many face similar air quality challenges, particularly in urban areas.
• Statement III: Not all countries ranked below India have better waste management systems compared to India. In fact, India faces significant waste management issues, which contribute to its lower ranking in the EPI.
• Statement IV: This statement is correct. The number of countries ranked below India in the EPI is four, highlighting India’s relatively low environmental performance compared to other nations.

Additional Information

• Environmental Performance Index (EPI)
  • The EPI evaluates countries' environmental health and sustainability, considering factors like air quality, water resources, and biodiversity.
• India’s EPI Ranking
  • India ranks low in the EPI, particularly due to challenges in air pollution, waste management, and water resource management, which contribute to its environmental concerns.
• Air Quality Regulations
  • While some countries ranked below India may have stronger air quality regulations, India faces significant air pollution issues in urban and industrial areas.

The correct answer is Ujjivan SFB and Equitas SFB.

In News

• The Reserve Bank of India (RBI) has approved the merger of Ujjivan Small Finance Bank (SFB) and Equitas Small Finance Bank (SFB), set to take effect on April 1, 2024.

Key Points

• The merger aims to create a stronger and more efficient small finance bank, benefiting from enhanced operational efficiencies and an expanded customer base.
• Shareholders of the bank being merged will receive shares of the acquiring bank based on an approved share swap ratio, providing them with a stake in the new entity.
• This merger is expected to provide the combined entity with better financial strength, operational scalability, and a broader range of services for customers.
• It highlights the consolidation trend in the small finance banking sector, aimed at improving competition and enhancing the quality of financial services for the underserved sectors.

Additional Information

• Small Finance Banks (SFBs)
  • Small Finance Banks are institutions that provide basic banking services with a focus on small businesses, micro-enterprises, and low-income individuals.
• Share Swap Ratio
  • In mergers, the share swap ratio is the rate at which the shareholders of the merging companies receive shares of the acquiring company based on their existing holdings.
• Reserve Bank of India (RBI)
  • The RBI is the central banking institution responsible for regulating and overseeing the banking system in India, including approval of mergers in the banking sector.

The correct answer is 6.

Key Points

• Six Indian banks were nationalized on 15^th April 1980.
• Nationalization is the transfer of ownership and management of an undertaking from private hands to the states.
• Banks were nationalized in India through an ordinance passed in the year 1969.
• Indira Gandhi was the prime minister who nationalized banks in India.
• The first nationalization of banks took place on 19^th July 1969.
  • 14 banks were nationalized in 1969.
  • It was based on the banks whose deposit exceeds Rs. 50 crores.
• The second time government nationalized banks on 15^th April 1980.
  • 6 banks were nationalized in 1980.
  • It was based on the banks whose deposit exceeds Rs. 200 crores.

Mistake Points

• Most of the nationalized banks in India are also referred to as 'public sector banks'.
• After the merger of many banks, currently there are a total of 12 public sector banks in India including the State Bank of India (based on the RBI official website).

The correct answer is Agriculture.

• In India, commercial banks have the highest share in the disbursement of credit to Agriculture.​

​Important Points 

• Priority Sector Lending: The government of India and the Reserve Bank of India consider some sectors as important as they need development to fulfill the basic needs of the country.
• Categories under priority sector: Agriculture.
  • Micro, Small and Medium Enterprises
  • Export Credit
  • Education
  • Housing
  • Social infrastructure
  • Renewable Energy
  • Others.

The correct answer is State Bank of India.

Key Points

State Bank of India:

• SBI is the largest commercial bank in India. SBI stands for State Bank of India. It is a public sector bank. Its headquarters is situated in Mumbai, Maharashtra.
• It is the largest commercial bank in India.
• Tag-line - Pure banking nothing else; With you all the way; The Nation banks on us; A Bank to the common man; A banker to every Indian.
• The latest Tagline of SBI is "Bade Bank Ke Bade Fayade" 
• Headquarters: Mumbai, Maharashtra
• State Bank of India (SBI) is an Indian multinational, public sector banking and financial services statutory body headquartered in Mumbai, Maharashtra.

The correct answer is 1975.

• The first Regional Rural Bank was established in India in the year 1975.

Key Points

• Regional Rural Banks:
  • The Regional Rural Banks (RRBs) are the newest form of banks that came into existence since the middle of the 1970s.
  • It was sponsored by individual nationalised commercial banks with the objective of developing the rural economy by providing crediting and depositing facilities for agriculture and other productive activities of all kinds in rural areas.
  • Regional Rural Banks (RRBs) were set up under the terms of the 26 September 1975 ordinance and the RRB Act of 1976.
  • First Regional Rural Bank was established on 2 October 1975.
  • The Prathama Bank of Moradabad, Uttar Pradesh was the first RRB.
  • Currently, there are 43 RRBs in India.

Additional Information

• Oudh Commercial Bank was the first complete Commercial Bank of India.
• ​The Imperial Bank was established in the year 1921 by merging three main Presidency Banks.
  • It was later rechristened as State Bank of India in 1955.
• Nationalisation of Banks was done in 1969.

The correct answer is Asian Development Bank.

Key Points

• The Asian Development Bank has offered $68 million in funding to IIFL Home Finance for expanding its footprint in the affordable and green housing segment.
• The funding comprises a direct ADB loan of $58 million and another $10 million concessional loan from the Canadian Climate Fund.
• This is IIFL Home Finance’s first loan from ADB or any other development finance institution.

Additional Information

• The Asian Development Bank (ADB) provided a record USD 4.6 billion loans to India in 2021, including USD 1.8 billion towards coronavirus response.
• USD 1.5 billion was towards vaccine procurement and USD 300 million to strengthen primary health care in urban areas and the country's future pandemic preparedness.
• The agency extended a USD 2.2-billion support for 12 state projects.
• The Asian Development Bank is a regional development bank established on 19 December 1966.
• The Asian Development Bank:
  • Headquarters: Mandaluyong, Philippines
  • President: Masatsugu Asakawa (As of Feb 2022)
  • Membership: 68 countries
  • Founded: 19 December 1966

Solution-

• Bank of Baroda is a public sector bank in India. Maharaja Sayajirao Gaekwad III of Baroda established this bank on July 20, 1908, in Baroda, the native state of Gujarat. This bank along with 13 other major commercial banks was nationalized by the Government of India on July 19, 1969.
• Indian Bank is a state-owned banking and financial services company, established in 1907. The headquarter of the bank is in Chennai, it has a large network of 2836 branches all over the country. It provides many banking and financial services such as savings accounts, fixed deposits, loans, etc.
• Canara Bank is indigenous and the third largest public sector bank of India, this bank was established on 1st July 1906 by Late Shri Ammembal Subbarao Pai and its headquarter is located in Bangalore Karnataka.
• Central Bank of India is a major public sector bank in India that was established in 1911 by Sir Sorabji Pochkhanwala, a Parsi banker influenced by the Swadeshi movement. It also has the distinction of being the first Indian commercial bank that was fully owned and managed by Indians at the time of its inception.

The correct answer is Malegam Committee.

Key Points

•  The creation of a separate category for NBFCs operating in the microfinance sector (NBFC-MFI) was done based on the recommendations of the Malegam Committee.
• The Malegam Committee was appointed by the Reserve Bank of India (RBI) in 2010 to review the microfinance sector in India and provide recommendations for its growth and development.
• The committee recommended the creation of a separate category of NBFCs for microfinance to regulate and supervise them effectively, and to ensure that they comply with the prescribed norms and standards.
• The NBFC-MFIs are required to obtain a certificate of registration from the RBI and comply with the regulations on interest rates, lending practices, borrower protection, and reporting requirements.

Additional Information

•  Narasimhan Committee:
  • It was appointed by the RBI in 1991 to review the financial system in India and provide recommendations for its reforms.
  • It recommended the creation of a four-tier banking system, the establishment of asset reconstruction companies, and the liberalization of the banking sector.
• Deepak Parekh Committee:
  • ​It was appointed by the RBI in 2018 to review the existing framework for the MSME sector and suggest measures to strengthen it.
  • It recommended the creation of a distressed asset fund, the simplification of the loan application process, and the enhancement of credit guarantee schemes.
• PK Mohanty Committee:
  • It was appointed by the RBI in 2013 to review the regulatory framework for the NBFC sector and suggest measures to enhance its stability and development.
  • It recommended the creation of a new category of NBFCs for infrastructure finance, the enhancement of risk management practices, and the strengthening of the supervisory framework.

The correct answer is IRDAI.

Key Points

• The Insurance Regulatory and Development Authority of India (IRDAI) is a regulatory body under the jurisdiction of the Ministry of Finance, Government of India.
• It is tasked with regulating and licensing the insurance and re-insurance industries in India.
• It was constituted by the Insurance Regulatory and Development Authority Act, 1999, an Act of Parliament passed by the Government of India.

Additional Information

• ​CRISIL
  • ​CRISIL is an Indian analytical company providing ratings, research, risk, and policy advisory services.
  • It is a subsidiary of the American company S&P Global.
  • CRISIL was the first credit rating agency in India, introduced in 1988 by the ICICI and UTI jointly with share capital coming from SBI, LIC and United India Insurance Company.

The correct answer is Mumbai.  Key Points 

• RBL Bank, formerly known as Ratnakar Bank, is an Indian private sector bank headquartered in Mumbai.
• It was founded on 6th August 1943 with two branches in Kolhapur and Sangli founded by Babgonda Bhujgonda Patil from Sangli & Gangappa Siddappa Chougule from Kolhapur.
• RBL bank received the banking license from the Reserve Bank of India in the year 1970.
• In August 2014, the name of the bank was changed to RBL Bank Limited.

Additional Information 

• The current MD and CEO of the bank as of October 2021 is Mr Vishwavir Ahuja.
• The bank provides the following facilities:
  • corporate and institutional banking
  • commercial banking
  • branch and business banking
  • retail assets
  • development banking and financial inclusion
  • treasury and financial market operations

The correct answer is Vision 2021.

Key Points

• Vision 2021:
  • The Reserve Bank of India (RBI) has released ‘Payment and Settlement Systems in India: Vision 2019 – 2021’, a vision document for a safe, secure, quick, and affordable e-payment system.
  • The core theme of the vision document is ‘Empowering Exceptional (E)payment Experience’, which stresses empowering every Indian to access a bunch of e-payment options safely and conveniently. Hence, Option 3 is correct.
  • The main agenda of the vision document is the ‘no-compromise approach towards safety and security of payment systems.
  • Vision 2021 outlined the measures that the central bank will undertake to foster innovation, cybersecurity, financial inclusion, customer protection, and competition.
  • The vision document aims to achieve a ‘highly digital and cash-lite society through Goal Posts (4Cs): Competition, Cost-effectiveness, Convenience, and Confidence.
  • Key focus areas:
    • Boosting customer experience with robust grievance redressal
    • Empowering e-payment service providers
    • Enabling eco-system and infrastructure for the e-payment system
    • Putting down forward-looking regulations
    • Undertaking Risk-focused Supervision

Additional Information

• The Reserve Bank of India:
  • It was established on April 1, 1935, under the provisions of the Reserve Bank of India Act, 1934.
  • The Central Office of the Reserve Bank was initially established in Calcutta but was permanently moved to Mumbai in 1937.
  • The Central Office is where the Governor sits and where policies are formulated.
  • Though originally privately owned, since nationalization in 1949, the Reserve Bank is fully owned by the Government of India.
  • The current Governor of RBI is Sanjay Malhotra.​​​