The UPSC Prelims often includes questions on Money & Banking, reflecting the significance of financial systems in the Indian economy. A key trend is the frequent focus on the Reserve Bank of India’s policies, such as liquidity measures and regulatory frameworks.
Another noticeable pattern is the emphasis on contemporary topics like digital currency, non-banking financial companies (NBFCs), and financial inclusion initiatives. This compilation helps aspirants identify and prepare for recurring themes in the exam.
Q. With reference to the Indian economy, “Collateral Borrowings and Lending Obligations” are the instrument of: [2024]
(a) Bond market
(b) Forex market
(c) Money market
(d) Stock market
Ans: (c)
Q. Consider the following statements: [2024]
1. In India, Non-Banking Financial Companies can access the Liquidity Adjustment Facility window of the Reserve Bank of India.
2. In India, Foreign Institutional Investors can hold the Government Securities (G-Secs).
3. In India, Stock Exchanges can offer separate trading platforms for debts.
(a) 1 and 2 only
(b) 3 only
(c) 1, 2 and 3
(d) 2 and 3 only
Ans: (d)
Q. With reference to the rule/rules imposed by the Reserve Bank of India while treating foreign banks, consider the following statements: [2024]
1. There is no minimum capital requirements for wholly owned banking subsidiaries in India.
2. For wholly owned banking subsidiaries in India, at least 50% of the board members should be Indian nationals.
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Ans: (b)
Q. Consider the following statements: [2024]
Statement I: Syndicated lending spreads the risk of borrower default across multiple lenders.
Statement II: The syndicated loan can be a fixed amount/lump sum of funds, but cannot be a credit line.
(a) Both Statement-I and Statement-II are correct and Statement-II explains Statement-I
(b) Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-I
(c) Statement-I is correct, but Statement-II is incorrect
(d) Statement-I is incorrect, but Statement-II is correct
Ans: (c)
Q. Consider the following statement in respect of the digital rupee: [2024]
1. It is a sovereign currency issued by the Reserve Bank of India (RBI) in alignment with its monetary policy.
2. It appears as a liability on the RBI’s balance sheet.
3. It is insured against inflation by its very design.
4. It is freely convertible against commercial bank money and cash.
(a) 1 and 2 only
(b) 1 and 3 only
(c) 2 and 4 only
(d) 1, 2 and 4
Ans: (d)
Q. Consider the following statements: [2023]
Statement-I: In the post-pandemic recent past, many Central Banks worldwide had carried out interest rate hikes.
Statement-II: Central Banks generally assume that they have the ability to counteract the rising consumer prices via monetary policy means.
(a) Both Statement-I and Statement-II are correct, and Statement-II is the correct explanation for Statement-I.
(b) Both Statement-I and Statement-II are correct, but Statement-II is not the correct explanation for Statement-I.
(c) Statement-I is correct, but Statement-II is incorrect.
(d) Statement-I is incorrect, but Statement-II is correct.
Ans: (a)
Q. Which one of the following activities of the Reserve Bank of India is considered to be part of ‘sterilisation’? [2023]
(a) Conducting ‘Open Market Operations’
(b) Oversight of settlement and payment systems
(c) Debt and cash management for the Central and State Governments
(d) Regulating the functions of Nonbanking Financial Institutions
Ans: (a)
Q. With reference to Central Bank Digital Currencies, consider the following statements: [2023]
1. It is possible to make payments in a digital currency without using US dollars or a SWIFT system.
2. A digital currency can be distributed with a condition programmed into it, such as a timeframe for spending it.
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Ans: (c)
Q. Consider the following statements: [2023]
1. The Self-Help Group (SHG) programme was originally initiated by the State Bank of India by providing microcredit to the financially deprived.
2. In an SHG, all members of a group take responsibility for a loan that an individual member takes.
3. The Regional Rural Banks and Scheduled Commercial Banks support SHGs.
How many of the above statements are correct?
(a) Only one
(b) Only two
(c) All three
(d) None
Ans: (b)
Q. With reference to the ‘Banks Board Bureau (BBB)’, which of the following statements is correct? [2022]
1. The Governor of RBI is the Chairman of the BBB.
2. BBB recommends for the selection of heads for Public Sector Banks.
3. BBB helps the Public Sector Banks in developing strategies and capital-raising plans.
Select the correct answer using the code given below:
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3
Ans: (b)
Q. With reference to Non-Fungible Tokens (NFTs), consider the following statements: [2022]
1. They enable the digital representation of physical assets.
2. They are unique cryptographic tokens that exist on a blockchain.
3. They can be traded or exchanged at equivalency and therefore can be used as a medium of commercial transactions.
Which of the statements given above are correct?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3
Ans: (a)
Q. Consider the following statements: [2021]
1. The Governor of the RBI is appointed by the Central Government.
2. Certain provisions in the Constitution of India give the Central Government the right to issue directions to the RBI in the public interest.
3. The Governor of the RBI draws his power from the RBI Act.
Which of the above statements are correct?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3
Ans: (c)
Q. The money multiplier in an economy increases with which one of the following? [2021]
(a) Increase in the Cash Reserve Ratio in the banks.
(b) Increase in the Statutory Liquidity Ratio in the banks.
(c) Increase in the banking habit of the people.
(d) Increase in the population of the country.
Ans: (c)
Q. In India, the Central Bank’s function as the ‘lender of last resort’ usually refers to which of the following? [2021]
1. Lending to trade and industry bodies when they fail to borrow from other sources.
2. Providing liquidity to the banks having a temporary crisis.
3. Lending to Governments to finance budgetary deficits.
Select the correct answer using the code given below:
(a) 1 and 2
(b) 2 only
(c) 2 and 3
(d) 3 only
Ans: (b)
Q. With reference to Urban Cooperative Banks in India, consider the following statements: [2021]
1. They are supervised and regulated by local boards set up by the State Governments.
2. They can issue equity shares and preference shares.
3. They were brought under the purview of the Banking Regulation Act, 1949 through an Amendment in 1966.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3
Ans: (b)
Q. With reference to ‘Blockchain Technology’ consider the following statements: [2020]
1. It is a public ledger that everyone can inspect, but which no single user controls.
2. The structure and design of blockchain is such that all the data in it are about cryptocurrency only.
3. Applications that depend on basic features of blockchain can be developed without anybody’s permission.
Which of the statements given above is/are correct?
(a) 1 only
(b) 1 and 2 only
(c) 2 only
(d) 1 and 3 only
Ans: (d)
Q. If you withdraw ₹1,00,000 in cash from your Demand Deposit Account at your bank, the immediate effect on aggregate money supply in the economy will be: [2020]
(a) to reduce it by ₹1,00,000
(b) to increase it by ₹1,00,000
(c) to increase it by more than ₹1,00,000
(d) to leave it unchanged
Ans: (d)
Q. If the RBI decides to adopt an expansionist monetary policy, which of the following would it not do? [2020]
1. Cut and optimise the Statutory Liquidity Ratio
2. Increase the Marginal Standing Facility Rate
3. Cut the Bank Rate and Repo Rate
Select the correct answer using the code given below:
(a) 1 and 2 only
(b) 2 only
(c) 1 and 3 only
(d) 1, 2 and 3
Ans: (b)
Q. Consider the following statements: [2020]
1. In terms of short-term credit delivery to the agriculture sector, District Central Co-operative Banks (DCCBs) deliver more credit in comparison to Scheduled Commercial Banks and Regional Rural Banks.
2. One of the most important functions of DCCBs is to provide funds to the Primary Agricultural Credit Societies.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Ans: (b)
Q. What is the importance of the term ‘Interest Coverage Ratio’ of a firm in India? [2020]
1. It helps in understanding the present risk of a firm that a bank is going to give a loan to.
2. It helps in evaluating the emerging risk of a firm that a bank is going to give a loan to.
3. The higher a borrowing firm’s level of Interest Coverage Ratio, the worse is its ability to service its debt.
Select the correct answer using the code given below:
(a) 1 and 2 only
(b) 2 only
(c) 1 and 3 only
(d) 1, 2 and 3
Ans: (a)
Q. Which of the following phrases defines the nature of the ‘Hundi’ generally referred to in the sources of the post-Harsha period? [2020]
(a) An advisory issued by the king to his subordinates
(b) A diary to be maintained for daily accounts
(c) A bill of exchange
(d) An order from the feudal lord to his subordinates
Ans: (c)
Q. Which of the following is not included in the assets of a Commercial Bank in India? [2019]
(a) Advances
(b) Deposits
(c) Investments
(d) Money at call and short notice
Ans: (b)
Q. What was the purpose of Inter-Creditor Agreement signed by Indian Banks and Financial Institutions recently? [2019]
(a) To lessen the Government of India’s perennial burden of fiscal deficit and current account deficit.
(b) To support the infrastructure projects of Central and State Governments.
(c) To act as an independent regulator in case of applications for loans of ₹50 crore or more.
(d) To aim at faster resolution of stressed assets of ₹50 crore or more which are under consortium lending.
Ans: (d)
Q. The Chairman of Public Sector Banks is selected by the: [2019]
(a) Banks Board Bureau
(b) Reserve Bank of India
(c) Union Ministry of Finance
(d) Management of concerned bank
Ans: (a)
Q. Which one of the following is not the most likely measure the Government/RBI takes to stop the slide of Indian rupee? [2019]
(a) Curbing imports of non-essential goods and promoting exports
(b) Encouraging Indian borrowers to issue rupee-denominated Masala Bonds
(c) Easing conditions relating to External Commercial Borrowings
(d) Following an expansionary monetary policy
Ans: (d)
Q. Consider the following statements: [2019]
The Reserve Bank of India’s recent directives relating to ‘Storage of Payment System Data,’ popularly known as data diktat, command the payment system providers that:
1. They shall ensure that entire data relating to payment systems operated by them are stored in a system only in India.
2. They shall ensure that the systems are owned and operated by Public Sector Enterprises.
3. They shall submit the consolidated system audit report to the Comptroller and Auditor General of India by the end of the calendar year.
Which of the statements given above is/are correct?
(a) 1 only
(b) 1 and 2 only
(c) 3 only
(d) 1, 2, and 3
Ans: (a)
Q. The money multiplier in an economy increases with which one of the following? [2019]
(a) Increase in the Cash Reserve Ratio
(b) Increase in the banking habit of the population
(c) Increase in the statutory liquidity ratio
(d) Increase in the population of the country
Ans: (b)
Q. The Service Area Approach was implemented under the purview of: [2019]
(a) Integrated Rural Development Approach
(b) Lead Bank Scheme
(c) Mahatma Gandhi National Rural Employment Guarantee Scheme
(d) National Skill Development Mission
Ans: (b)
Q. Which one of the following best describes the term ‘Merchant Discount Rate’ sometimes seen in news? [2018]
(a) The incentive given by a bank to a merchant for accepting payments through debit cards pertaining to that bank.
(b) The amount paid back by banks to their customers when they use debit cards for financial transactions for purchasing goods or services.
(c) The charge to a merchant by a bank for accepting payments from his customers through the bank’s debit cards.
(d) The incentive given by the Government to merchants for promoting digital payments by their customers through point-of-sale (PoS) machines and debit cards.
Ans: (c)
Q. Consider the following statements: [2018]
1. Capital Adequacy Ratio (CAR) is the amount that banks have to maintain in the form of their own funds to offset any loss that banks incur if the account holders fail to repay dues.
2. CAR is decided by each individual bank.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Ans: (a)
Q. Which one of the following statements correctly describes the meaning of legal tender money? [2018]
(a) The money which is tendered in courts of law to defray the fee of legal cases.
(b) The money which a creditor is under compulsion to accept in settlement of his claims.
(c) The bank money in the form of cheques, drafts, bills of exchange, etc.
(d) The metallic money in circulation in a country.
Ans: (b)
Q. Consider the following statements: [2018]
1. The Reserve Bank of India manages and services the Government of India Securities but not any state Government securities.
2. Treasury Bills are issued by the Government of India and there are no Treasury Bills issued by the State Governments.
3. Treasury Bills offers are issued at a discount from the par value.
Which of the statements given above is/are correct?
(a) 1 and 2 only
(b) 3 only
(c) 2 and 3 only
(d) 1, 2, and 3
Ans: (c)
Q. With reference to the governance of public sector banking in India, consider the following statements: [2018]
1. Capital infusion into Public Sector Banks by the Government of India has steadily increased in the last decade.
2. To put the public sector banks in order, the merger of associate banks with the parent State Bank of India has been effected.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Ans: (b)
Q. Which of the following statements is/are correct regarding the Monetary Policy Committee (MPC)? [2017]
1. It decides the RBI’s benchmark interest rate.
2. It is a 12-member body including the Governor of RBI and is reconstituted every year.
3. It functions under the Chairmanship of the Union Finance Minister.
Select the correct answer using the code given below:
(a) 1 only
(b) 1 and 2 only
(c) 3 only
(d) 2 and 3 only
Ans: (a)
Q. Which of the following statements best describes the term ‘Scheme for Sustainable Structuring of Stressed Assets (S4A)’ recently seen in the news? [2017]
(a) It is a procedure for considering ecological costs of developmental schemes formulated by the Government.
(b) It is a scheme of RBI for reworking the financial structure of big corporate entities facing genuine difficulties.
(c) It is a disinvestment plan of the Government regarding Central Public Sector Undertakings.
(d) It is an important provision in ‘The Insolvency and Bankruptcy Code’ recently implemented by the Government.
Ans: (b)
Q. What is the purpose of setting up of Small Finance Banks (SFBs) in India? [2017]
1. To supply credit to small business units.
2. To supply credit to small and marginal farmers.
3. To encourage young entrepreneurs to set up businesses particularly in rural areas.
Select the correct answer using the code given below:
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2, and 3
Ans: (a)
Q. Consider the following statements: [2017]
1. National Payments Corporation of India (NPCI) helps in promoting the financial inclusion in the country.
2. NPCI has launched Rupay, a card payment scheme.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Ans: (c)
Q. Which of the following is a most likely consequence of implementing the Unified Payments Interface (UPI)? [2017]
(a) Mobile wallets will not be necessary for online payments.
(b) Digital currency will totally replace the physical currency in about two decades.
(c) FDI inflows will drastically increase.
(d) Direct transfer of subsidies to poor people will become very effective.
Ans: (a)
Q. The establishment of ‘Payments Banks’ is being allowed in India to promote financial inclusion. Which of the following statements is/are correct in this context? [2016]
1. Mobile telephone companies and supermarket chains that are owned and controlled by residents are eligible to be promoters of Payments Banks.
2. Payments Banks can issue both credit cards and debit cards.
3. Payments Banks cannot undertake lending activities.
Select the correct answer using the code given below:
(a) 1 and 2 only
(b) 1 and 3 only
(c) 2 only
(d) 1, 2, and 3
Ans: (b)
Q. The term ‘Core Banking Solution’ is sometimes seen in the news. Which of the following statements best describes this term? [2016]
1. It is networking of a bank’s branches which enable customers to operate their accounts from any branch of the bank on its network regardless of where they open their accounts.
2. It is an effort to increase RBI’s control over commercial banks through computerisation.
3. It is a detailed procedure by which a bank with huge non-performing assets is taken over by another bank.
Select the correct answer using the code given below:
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3
Ans: (a)
Q. Pradhan Mantri MUDRA Yojana is aimed at: [2016]
(a) Bringing the small entrepreneurs into the formal financial system.
(b) Providing loans to poor farmers for cultivating particular crops.
(c) Providing pensions to old and destitute persons.
(d) Funding the voluntary organizations involved in the promotion of skill development and employment generation.
Ans: (a)
Q. ‘Basel-III Accord’ or simply ‘Basel-III’ often seen in the news seeks to: [2015]
(a) Develop national strategies for the conservation and sustainable use of biological diversity.
(b) Improve the banking sector’s ability to deal with financial and economic stress and improve risk management.
(c) Reduce the greenhouse gas emissions but place a heavier burden on developed countries.
(d) Transfer technology from developed countries to poor countries to enable them to replace the use of chlorofluorocarbons in refrigeration with harmless chemicals.
Ans: (b)
Q. When the Reserve Bank of India reduced the Statutory Liquidity Ratio by 50 basis points, which of the following is likely to happen? [2015]
(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 to the banking system.
Ans: (c)
Q. With reference to Indian economy, consider the following: [2015]
1. Bank Rate
2. Open Market Operations
3. Public Debt
4. Public Revenue
Which of the above is/are component/components of Monetary Policy?
(a) 1 only
(b) 2, 3, and 4
(c) 1 and 2
(d) 1, 3, and 4
Ans: (c)
Q. What is/are the facility/facilities the beneficiaries can get from the services of Business Correspondent (Bank Saathi) in branchless areas? [2014]
1. It enables the beneficiaries to draw their subsidies and social security benefits in their villages.
2. It enables the beneficiaries in the rural areas to make deposits and withdrawals.
Select the correct answer using the code given below:
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Ans: (c)
Q. The terms ‘Marginal Standing Facility Rate’ and ‘Net Demand and Time Liabilities’ sometimes appearing in news are used in relation to: [2014]
(a) Banking operations
(b) Communication networking
(c) Military strategies
(d) Supply and demand of agricultural products
Ans: (a)
Q. Consider the following liquid assets: [2013]
1. Demand deposits with the banks
2. Time deposits with the banks
3. Saving deposits with the banks
4. Currency
The correct sequence of these assets in the decreasing order of liquidity is:
(a) 1-4-3-2
(b) 4-3-2-1
(c) 2-3-1-4
(d) 4-1-3-2
Ans: (d)
Q. In the context of Indian economy, ‘Open Market Operations’ refers to: [2013]
(a) Borrowing by scheduled banks from the RBI
(b) Lending by commercial banks to industry and trade
(c) Purchase and sale of Government Securities by the RBI
(d) None of the above
Ans: (c)
Q. Priority Sector Lending by banks in India constitutes the lending to: [2013]
(a) Agriculture
(b) Micro and Small enterprises
(c) Weaker Sections
(d) All of the above
Ans: (d)
Q. Supply of money remaining the same when there is an increase in demand for money, there will be: [2013]
(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.
Ans: (b)
Q. Which of the following grant/grants direct credit assistance to rural households? [2013]
1. Regional Rural Banks
2. National Bank for Agriculture and Rural Development (NABARD)
3. Land Development Banks
Select the correct answer using the codes given below:
(a) 1 and 2 only
(b) 2 only
(c) 1 and 3 only
(d) 1, 2, and 3
Ans: (c)
Q. The Reserve Bank of India regulates the commercial banks in matters of: [2013]
1. Liquidity of assets
2. Branch expansion
3. Merger of banks
4. Winding up of banks
Select the correct answer using the codes given below:
(a) 1 and 4 only
(b) 2, 3, and 4 only
(c) 1, 2, and 3 only
(d) 1, 2, 3, and 4
Ans: (d)
Q. An increase in the Bank Rate generally indicates that the: [2013]
(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
Ans: (d)
Q. The Reserve Bank of India (RBI) acts as a banker’s bank. This would imply which of the following? [2012]
1. Other banks retain their deposits with the RBI
2. The RBI lends funds to the commercial banks in times of need
3. The RBI advises the commercial banks on monetary matters
Select the correct answer using the codes given below:
(a) 2 and 3 only
(b) 1 and 2 only
(c) 1 and 3 only
(d) 1, 2, and 3
Ans: (a)
Q. Which of the following measures would result in an increase in the money supply in the economy? [2012]
1. Purchase of Government securities from the public by the Central Bank
2. Deposit of currency in commercial banks by the public
3. Borrowing by the Government from the Central Bank
4. Sale of Government Securities to the public by the Central Bank
Select the correct answer using the codes given below:
(a) 1 only
(b) 2 and 4 only
(c) 1 and 3 only
(d) 2, 3, and 4
Ans: (c)
Q. The basic idea of Lead Bank Scheme is that: [2012]
(a) Big Banks should try to open offices in each district.
(b) There should be stiff competition among the various nationalized banks.
(c) Individual banks should adopt particular districts for intensive development.
(d) All the banks should make intensive efforts to mobilize deposits.
Ans: (c)
Q. The lowering of bank rate by the Reserve Bank of India leads to: [2011]
(a) More liquidity in the market.
(b) Less liquidity in the market.
(c) No change in the liquidity in the market.
(d) Mobilization of more deposits by the commercial banks.
Ans: (a)
Q. In India, which of the following has the highest share in the disbursement of credit to agriculture and allied activities? [2011]
(a) Commercial Banks
(b) Co-operative Banks
(c) Regional Rural Banks
(d) Micro Finance Institutions
Ans: (a)
Q. With reference to the institution of Banking Ombudsman in India, which one of the statements is not correct? [2010]
(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
Ans: (c)
Q. With reference to India, consider the following: [2010]
1. Nationalization of Banks
2. Formation of Regional Rural Banks
3. Adoption of villages by Bank Branches
Which of the above can be considered as steps taken to achieve the ‘financial inclusion’ in India?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 3 only
(d) 1, 2, and 3
Ans: (d)
Q. Consider the following statements: [2010]
The functions of commercial banks in India include:
1. Purchase and sale of shares and securities on behalf of customers
2. Acting as executors and trustees of wills
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Ans: (c)
Q. In India, the interest rate on savings accounts in all the nationalized commercial banks is fixed by: [2010]
(a) Union Ministry of Finance
(b) Union Finance Commission
(c) Indian Banks’ Association
(d) None of the above
Ans: (d)
Q. Which of the following terms indicates a mechanism used by commercial banks for providing credit to the Government? [2010]
(a) Cash Credit Ratio
(b) Debt Service Obligation
(c) Liquidity Adjustment Facility
(d) Statutory Liquidity Ratio
Ans: (d)
Q. With reference to the Non-Banking Financial Companies (NBFCs) in India, consider the following statements: [2010]
1. They cannot engage in the acquisition of securities issued by the Government
2. They cannot accept demand deposits like Saving Accounts
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Ans: (b)
Q. When the Reserve Bank of India announces an increase of the Cash Reserve Ratio, what does it mean? [2010]
(a) The 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) The Commercial Banks will have more money to lend
Ans: (a)