1. To be classified as a "Scheduled Bank" under the RBI Act, 1934, a bank must satisfy which condition?
Its paid-up capital and reserves must be at least ?5 Lakh, and its affairs must not be detrimental to depositors.
It must be a Public Sector Bank.
It must be included in the First Schedule of the RBI Act.
It must have a minimum of 100 branches.
Explanation:
A Scheduled Bank is one included in the Second Schedule of the RBI Act, 1934. To qualify, it must have a paid-up capital and reserves of not less than ?5 Lakhs and satisfy the RBI that its affairs are not conducted in a manner detrimental to the interests of its depositors.
2. What is the minimum paid-up voting equity capital required for setting up a Small Finance Bank (SFB)?
?100 Crore
?1000 Crore
?500 Crore
?200 Crore
Explanation:
As per RBI guidelines (revised), the minimum paid-up voting equity capital for Small Finance Banks is ?200 crore. (For Universal Banks, it is ?500 crore, later revised to ?1000 crore for new licenses).
3. Which of the following activities is PROHIBITED for Payments Banks?
Selling third-party financial products like insurance.
Lending loans and issuing credit cards.
Accepting demand deposits up to ?2 Lakh.
Issuing debit cards.
Explanation:
Payments Banks are designed to provide small savings accounts and payments/remittance services. They are strictly prohibited from undertaking lending activities or issuing credit cards to avoid credit risk.
4. Urban Cooperative Banks (UCBs) are subject to "Dual Control" by which two entities?
RBI and SEBI
Central Govt and State Govt
RBI and Registrar of Cooperative Societies (RCS)
NABARD and RBI
Explanation:
UCBs operate under dual regulation: Banking functions are regulated by the RBI (Banking Regulation Act), while management/incorporation issues are regulated by the RCS of the State (or Central RCS for multi-state banks).
5. Which of the following banks is classified as a Domestic Systemically Important Bank (D-SIB) by RBI (as of 2023)?
Canara Bank
Union Bank of India
Punjab National Bank
HDFC Bank
Explanation:
RBI classifies SBI, HDFC Bank, and ICICI Bank as D-SIBs. These are banks considered "Too Big To Fail" and are subject to higher capital conservation buffer requirements.
6. Which entity owns and operates the "Unified Payments Interface" (UPI) system in India?
National Payments Corporation of India (NPCI)
Indian Banks' Association (IBA)
NITI Aayog
Reserve Bank of India (RBI)
Explanation:
NPCI, an umbrella organization for operating retail payments and settlement systems in India, developed and operates the UPI platform.
7. The equity capital of a Regional Rural Bank (RRB) is held by the Central Government, State Government, and Sponsor Bank in the ratio of:
33 : 33 : 33
50 : 15 : 35
40 : 40 : 20
50 : 35 : 15
Explanation:
The ownership structure of RRBs is fixed: Central Government (50%), Sponsor Bank (35%), and State Government (15%).
8. Local Area Banks (LABs) were set up to bridge the gap in credit availability in:
Rural and Semi-Urban areas across 2-3 contiguous districts
Hilly Terrains only
Special Economic Zones
Metropolitan Cities
Explanation:
LABs were established as low-cost structures to mobilize rural savings and provide credit in a limited area of operation (typically 3 contiguous districts).
9. Small Finance Banks (SFBs) are required to extend what percentage of their Adjusted Net Bank Credit (ANBC) to the Priority Sector?
Explanation:
Unlike universal banks (target 40%), SFBs have a higher mandate to serve the underserved, hence their Priority Sector Lending (PSL) target is set at 75% of ANBC.
10. Which of the following restrictions applies to Payment Banks regarding their investment of deposits?
They must invest minimum 75% of demand deposit balances in SLR eligible Government Securities/T-Bills.
They are not required to hold any SLR.
They must lend 75% to the priority sector.
They can invest 100% in the stock market.
Explanation:
To ensure safety and liquidity, Payment Banks are mandated to invest at least 75% of their demand deposit balances in Government Securities with maturity up to one year.
11. The "Lead Bank Scheme" was introduced by RBI in 1969 to:
Provide leadership in digital banking.
Designate one bank in each district as the "Lead Bank" to coordinate credit deployment.
Lead the privatization of banks.
Merge small banks into a lead bank.
Explanation:
The Lead Bank Scheme assigns a specific bank in each district the responsibility of surveying credit needs, developing credit plans, and coordinating with other banks and government agencies to ensure banking development in that district.
12. The "Service Area Approach" (SAA) launched in 1989 was aimed at:
Computerization of branches.
Export promotion.
Urban housing finance.
Improving the quality of rural lending by assigning specific villages to a bank branch.
Explanation:
Under SAA, each rural and semi-urban bank branch was assigned a specific service area comprising 15 to 25 villages for planned and orderly development of that area.
13. What is a key functional difference between a Small Finance Bank (SFB) and a Payment Bank?
SFBs can accept deposits, Payment Banks cannot.
SFBs have a lower capital requirement than Payment Banks.
Payment Banks can issue credit cards, SFBs cannot.
SFBs can lend money, Payment Banks cannot.
Explanation:
Both can accept deposits (Payment Banks have a limit). The critical difference is that SFBs can undertake lending activities, whereas Payment Banks are strictly prohibited from lending to minimize risk.
14. RBI incentivizes Foreign Banks to enter India through the "Wholly Owned Subsidiary" (WOS) mode because:
It reduces their capital requirements.
It prevents them from opening rural branches.
It provides better regulatory control and ring-fences local operations from global shocks.
It allows them to bypass PSL norms.
Explanation:
The WOS model ensures that the Indian operations are a separate legal entity with its own capital and board, protecting it if the parent bank abroad fails (Ring-fencing).