MCQ on Money and Banking. We covered all the MCQ on Money and Banking in this post for free so that you can practice well for the exam.
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Mock Test on Money and Banking for Students
When the Reserve Bank of India announced an increase in the Cash Reserve Ratio (CRR), what does it means?
(a) Commercial banks will have less money to lend.
(b) The Reserve Bank of India will have less money to lend.
(c) The Union Government will have less money to lend.
(d) None of the above
Option a – Commercial banks will have less money to lend
Which one among the following is the precious metal (Gold) or other approved securities that a commercial bank must maintain as reserves other than the cash with RBI?
(a) Cash Reserve Requirement
(b) Statutory Liquidity Requirement
(c) Forward Fund
(d) Reserve Money
Option b – Statutory Liquidity Requirement
In India, the Repo Rate is announced by
(a) the Ministry of Finance, Government of India
(b) the Prime Minister of India
(c) the Reserve Bank of India
(d) the President of India
Option c – the Reserve Bank of India
Which one of the following rates is the rate at which banks park their funds with the Central Bank?
(a) Repo Rate
(b) Bank Rate
(c) Prime Lending Rate
(d) Reverse Repo Rate
Option d – Reverse Repo Rate
The banks are required to maintain a certain ratio between their cash in hand and total assets. This is called
(a) SLR
(b) CBR
(c) SBR
(d) CRR
Option d – CRR
If the Cash Reserve Ratio is lowered by the RBI, its impact on credit creation will be to
(a) increase it
(b) decrease it
(c) have no impact
(d) None of these
Option a – increase it
The Cash Reserve Ratio refers to
(a) the share of Net Demand and Time Liabilities that banks have to hold as liquid assets.
(b) the share of Net Demand and Time Liabilities that banks have to hold as balances with the RBI.
(c) the share of Net Demand and Time Liabilities that banks have to hold as part of their cash reserves.
(d) the ratio of cash holding to reserve banks.
Option b – the share of Net Demand and Time Liabilities that banks have to hold as balances with the RBI
Supply of money regaining the same when there is an increase in demand for money, there will be
(a) a fall in the level of prices
(b) an increase in the rate of interest.
(c) a decrease in the rate of interest.
(d) an increase in the level of income and employment.
Option a – a fall in the level of prices
An increase in the bank rate generally indicates that the
(a) market rate of interest is likely to fall.
(b) Central Bank is no longer making loans to commercial banks.
(c) Central Bank is following an easy money policy.
(d) Central Bank is following a tight money policy.
Which one of the following is the correct description of the Bank Rate in the Indian money market?
(a) Rate of interest charged by commercial banks from the borrowers.
(b) Rate of interest which commercial banks discounted bills of their borrowers.
(c) The rate of interest allows by commercial banks on their deposits.
(d) The rate at which RBI purchases or rediscounts bills of exchange of commercial banks.
Option d – The rate at which RBI purchases or rediscounts bills of exchange of commercial banks
Reserve Bank of India gives short-term loans to commercial banks.
(a) interest rate
(b) bank rate
(c) reserve repo rate
(d) repo rate
Option d – repo rate
If the inflation in an economy is rising steadily, the Central Bank might
(a) increase the repo rate
(b) decrease the reverse repo rate
(c) decrease the repo rate
(d) keep the repo rate unchanged
Option a – increase the repo rate
Which one of the following is not correct about the Repo rate?
(a) It is the interest rate charged by the Central Bank on overnight loans.
(b) It is the interest rate paid by commercial banks on overnight borrowing.
(c) It is the interest rate agreed upon in the loan contract between a commercial bank and the Central Bank
(d) It is the cost of collateral security.
Option d – It is the cost of collateral security
Which of these institutions fixes the Repo Rate and the Reverse Repo Rate in India?
(a) Comptroller and Auditor General of India
(b) Reserve Bank of India
(c) Ministry of Finance
(d) State Bank of India
Option b – Reserve Bank of India
Which of the following terms indicates a mechanism used by commercial banks for providing credit to the Government?
(a) Cash Credit Ratio
(b) Debit Service Obligation
(c) Liquidity Adjustment Facility
(d) Statutory Liquidity Ratio
Option d – Statutory Liquidity Ratio
When the Reserve Bank of India reduces the Statutory Liquidity Ratio by 50 basis points, which of the following is likely to happen?
(a) India’s GDP growth rate increases drastically.
(b) Foreign institutional investors may bring more capital into our country.
(c) Scheduled commercial banks may cut their lending rates.
(d) It may drastically reduce the liquidity of the banking system.
Option c – Scheduled commercial banks may cut their lending rates
With the aim of containing inflation and anchoring inflationary expectations, in recent times, the Reserve Bank of India actively managed liquidity through the appropriate use of which one of the following?
(a) Liquidity Adjustment Facility
(b) Interest Subvention
(c) Open Market Operations
(d) Both (a) and (c)
Option d – Both (a) and (c)
Which among the following is/are the recommendations of the Nachiket Mor Committee? 1. Every adult in our country should have a bank account by 1st January 2016. II. Abolition of interest subsidies. III. Unified financial redress agency under Finance Ministry for customer grievances IV. Raising priority sector lending cap for banks to 70% from the current 40%. Choose the right answer from the codes given below.
(a) I, II and Ill
(b) Only IV
(c) II and IV
(d) All of the above
Option a – I, II and III
What do you mean by the Open Market Operation of RBI?
(a) Trading of securities
(b) Auction of foreign currency
(c) Trade of Gold
(d) None of the above
Option a – Trading of securities
Open market operations of the Reserve Bank of India refers to
(a) trading in securities
(b) auctioning of foreign exchange
(c) transaction in gold
(d) None of the above
Option a – trading in securities
Banks of India are required to maintain a certain ratio between their risky assets and capital which is known as
(a) Cap Adeuacy Ratio (CAR)
(b) Statutory Liquidity Ratio (SLR)
(c) General Bank Reserve (GBR)
(d) Capital-to-Risk-Weighted Adequacy Ratio (CRAR)
Option d – Capital-to-Risk-Weighted Adequacy Ratio (CRAR)
Bank rate means ( MCQ on Money and Banking )
(a) interest rate charged by moneylenders.
(b) the interest rate charged by scheduled banks.
(c) rate of profit of banking institutions.
(d) the official rate of interest charged by the Central Bank.
Option d – the official rate of interest charged by the Central Bank
Who among the following was the Chairman of the Committee on Deepening Digital Payments appointed by the RBI? ( MCQ on Money and Banking )
(a) HR Khan
(b) Nandan Nilekani
(c) NR Narayana Murthy
(d) Sanjay Jain
Option b – Nandan Nilekani
The Reserve Bank of India has recently constituted a high-level task force on Public Credit Registry (PCR) to suggest a road map for developing a transparent, comprehensive, and near-real-time PCR for India. The task force is headed by
(a) Sekar Karnam
(b) Vishakha Mulye
(c) Sriram Kalyanaraman
(d) YM Deosthalee
Option d – YM Deosthalee
Maintained Commercial Dealing
A) Banking
B) Commerce
C) Loan
D) Saving
Option a – Banking
Maximum ATM Cash Withdrawal
A) 2
B) 4
C) 3
D) 5
Option c – 3
Norms for Getting Loans to SHGs
A) No need for a guarantee
B) Assets should be shown as guarantee
C) Wealthy persons should act as guarantors
D) None
Option a – No need for a guarantee
Extensively Used to Withdraw and Pay Money
A) Drafts
B) Cheques
C) Debentures
D) Hundis
Option b – Cheques
Age Limit to Open a Savings Account
A) 7
B) 10
C) 15
D) 18
Option b – 10
Early Bankers in India
A) Bengal – Jagatseths
B) Patna – Shahs
C) Surat – Arunji Nathji, Madras – Chettiars
D) All the above
Option d – All the above
Main Trade Centre in Europe in 1606
A) Paris
B) Moscow
C) Amsterdam
D) Madrid
Option c – Amsterdam
Types of Silver and Gold Coins in Amsterdam (1606)
A) 840
B) 846
C) 850
D) 900
Option b – 846
SHG means
A) Self-Help Group
B) Self Heritage Group
C) Self Historical Groupism
D) All the above
Option a – Self-Help Group
Money changed its form from metal to paper. Pick the right comment.
A) Metal money has more value.
B) Paper money has more value.
C) Plastic money has more value.
D) Material has no value, only money has value.
Option d – Material has no value, only money has value
Fixed Deposit or a Term Deposit. Cannot be withdrawn from the bank for a fixed period of time. It could be one year, two, five, or seven years. The rate of interest is higher on a fixed deposit. Pick the right comment.
A) As the deposit has a guaranteed fixed time, the rate of interest is high.
B) Seven year deposit has less interest.
C) Term deposit is totally different from a fixed deposit.
D) No interest will be credited if it is drawn early.
Option a – As the deposit has a guaranteed fixed time, the rate of interest is high
Barter system of exchange. The system of exchanging goods directly against each other without the use of money is called the Barter system. Which one of the following comes under the Barter system of exchange?
A) A salt vendor sells his salt for grains.
B) A washerman washes clothes for grains.
C) Ramu and Ravi exchanged their clothes.
D) All the above
Option d – All the above
Consider the following statements. I. Priority Sector lending started with the establishment of the Banking System in India. II. Priority Sector lending is mainly aimed to give adequate assistance to those sectors which contributed a significant proportion of the national product. Which of the statements given above is/are correct?
(a) Only I
(b) Only Il
(c) Both I and II
(d) Neither I nor II
Option b – Only II
The Reserve Bank of India regulates commercial banks in matters of I. liquidity of assets II. branch expansion III. the merger of banks IV. winding-up of banks Select the correct answer using the codes given below.
(a) I and IV
(b) II, III and III
(c) I, II and III
(d) I, II, III and IV
Option d – I, II, III and IV
Which one of the following currencies are used by RBI to construct the Nominal Effective Exchange Rate (NEER) and Real Effective Exchange Rate (REER) of Indian Currency?
(a) Japanese Yen
(b) Chinese Renminbi
(c) Pound Sterling
(d) All of the above
Option d – All of the above
Which one of the following is the custodian of the Foreign Exchange Reserve of the Indian Government?
(a) Security Exchange Board of India
(b) Insurance Regulatory Development Authority
(c) Reserve Bank of India
(d) None of the above
Option c – Reserve Bank of India
Which one of the following is not a qualitative control of credit by the Central Bank of a country?
(a) Rationing of the credit
(b) Regulation of consumer credit
(c) Variation of the reserve ratio
(d) Regulation of margin requirements
Option b – Regulation of consumer credit
Priority sector lending by banks in India constitutes lending to
(a) agriculture
(b) micro and small enterprises
(c) weaker sections
(d) All of the above
Option d – All of the above
Foreign Exchange Reserves are accumulated when there is the absorption of the excess foreign exchange flows by the RBI through intervention in foreign exchange markets. Which of the following currency is used by the RBI as an intervention currency?
(a) US Dollar
(b) Euro
(c) Japanese Yen
(d) Both (a) and (b)
Option d – Both (a) and (b)
The monetary and credit policy is announced by which of the following?
(a) Ministry of Finance in Centre
(b) RBI
(c) SBI
(d) Planning Commission
Option b – RBI
Select the correct statement regarding the Priority Sector Lending (PSL) obligations of the banks operating in India.
(a) The number of items in the PSL has been decreased by the Government of India, following the recommendations of the Narasimhan Committee-l
(b) nationalized banks have to fulfill higher targets of the PSL than the Indian private sector banks.
(c) for foreign private banks, the PSL compulsion has been withdrawn.
(d) poorest among the poor also come under the PSL.
Option d – poorest among the poor also come under the PSL
With reference to the institution of the Banking Ombudsman in India, which one of the statements is not correct?
(a) The Banking Ombudsman is appointed by the Reserve Bank of India
(b) The Banking Ombudsman can consider complaints from Non-Resident Indians having accounts in India.
(c) The orders passed by the Banking Ombudsman are final and binding on the parties concerned.
(d) The service provided by the Banking Ombudsman is free of any fee.
Option c – The orders passed by the Banking Ombudsman are final and binding on the parties concerned
Consider the following statements. I. Buying and selling of eligible securities by the Reserve Bank of India is an important feature of the open market operation. II. Open market operation influences the volume of loans and advances made by commercial banks in India. Which of the statements given above is/are correct?
(a) Only I
(b) Only II
(c) Both I and II
(d) Neither I nor II
Option c – Both I and II
Select the correct one/ones about the Banking Financial Supervision (BFS) in India. I. The RBI performs its financial supervision functions under the guidance of the Board for Financial Supervision (BFS). II. The primary objective of BFS is to undertake consolidated supervision of the financial sector comprising commercial banks, financial institutions, and non-banking finance companies. Codes
(a) Only I
(b) Only II
(c) Both I and II
(d) Neither I nor II
Option c – Both I and II
Which of the following committees was constituted to scrutinize the application for new banks in India?
(a) Bandhan Committee
(b) Deepak Mohanty Committee
(c) Bimal Jalan Committee
(d) Khandelwal Committee
Option c – Bimal Jalan Committee
Which among the following committees was on banking sector reforms?
(a) Narasimham I
(b) Narasimham II
(c) Narasimham III
(d) Damodaran Committee
Option b – Narasimham II
Which of the following committees has given its recommendations on Financial Inclusion?
(a) Rakesh Mohan Committee
(b) Rangarajan Committee
(c) Sinha Committee
(d) Kelar Committee
Option b – Rangarajan Committee
On which of the following committee’s recommendations, RBI introduced the base rate system?
(a) MV Nair Committee
(b) Deepak Mohanty Committee
(c) Khandelwal Committee
(d) Nachiket Mor Committee
Option b – Deepak Mohanty Committee
Which one of the following is not a function of the RBI?
(a) Credit control
(b) Organisation of Scheduled Commercial Banks
(c) Formulation of Monetary Policy
(d) Credit creation
Option d – Credit creation
Consider the following statements regarding India’s minimum reserve system and select the incorrect ones using the codes given below. I. In the minimum reserve system, RBI had to keep a minimum reserve of gold worth 115 crores and the rest in Indian rupees. II. The minimum requirement of foreign securities was diluted when the minimum reserve system was launched.
(a) Only II
(b) Only II
(c) Both I and II
(d) Neither I and II
Option c – Both I and II
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 Schedule of the RBI Act, of 1934. Which of the statements given above is/are correct?
(a) Only I
(b) Only II
(c) Both I and II
(d) Neither I nor II
Option b – Only II
Which of the following is not a function of the Reserve Bank of India?
(a) Provide Credit facility to the general public.
(b) Keep government money in various account heads.
(c) Frame Monetary and Credit Policy.
(d) All are RBI’s functions.
Option a – Provide Credit facility to the general public
Consider the following kinds of credit controls. I. Minimum margins for lending against specific securities. II. Ceiling on the amounts of credit for certain purposes. III. Discriminatory rate of interest charged on certain types of advances. Which of the credit controls given above are used by RBI as a selective credit control measure?
(a) I and II
(b) I and II
(c) II and III
(d) All of these
Option d – All of these
The Reserve Bank of India (RBI) acts as a bankers’ bank. This would imply which of the following? I. Other banks retain their deposits with the RBI. the RBI lends funds to II. The commercial banks in times of need. III. The RBI advises commercial banks on monetary matters. Select the correct answer using the codes given below.
(a) Only II
(b) I and II
(c) II and III
(d) All of these
Option b – I and II
Consider the following statements regarding the Reserve Bank of India. I. It is a banker to the Central Government. II. It formulates and administers the monetary policy. III. It acts as an agent of the Government in respect of India’s membership of the IMF. IV. It handles the borrowing program of the Government of India. Which of these statements is correct?
(a) I and II
(b) II, III and IV
(c) I, II, III and IV
(d) III and IV
Option c – I, II, III and IV
Which one of the following committees was constituted to bring reform to the Indian Banking System? ( Money and Banking UPSC )
(a) Abhijit Sen Committee
(b) Abid Hussain Committee
(c) Suresh Tendulkar Committee
(d) M Narsimham Committee
Option d – M Narsimham Committee
Which one of the following committees were constituted by the RBI to study issues and concerns in the micro-finance sector?
(a) M Narasimhan Committee
(b) S Janikiraman Committee
(c) Chakarvarti Committee
(d) YH Malegam Committee
Option d – YH Malegam Committee
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