RBI GRADE B PHASE 2 MAINS MCQ STUDY MATERIAL ON REVISED PATTERN PAPER FINANCE & MANAGEMENT TOPIC RBI & ITS FUNCTIONS



1. The Reserve Bank of India was established on _______.

a) April 1, 1935
b) July 12, 1982
c) May 26, 2006
d) September 30, 2005



ANSWER: On April 1, 1935 the Reserve Bank of India, which is the central bank of this country, was established. It was originally started as a shareholders' bank with a share capital of Rs. 5 crore divided into shares of Rs. 100 each, fully paid-up. But since January, 1949 the Reserve Bank has been nationalised and it is now purely a concern of the State. The Government of India holds the entire share capital of the bank which has been acquired by payment of compensation to the shareholders.


2. Who works as RBI's agent at places where it has no office of its own?

a) State Bank of India
b) Ministry of Finance
c) Government of India
d) International Monetary Fund



ANSWER: a) State Bank of India

The State Bank of India works as RBI's agent at places where it has no office of its own.


3. Which of the following is true about the functions performed by RBI -

(i) It is the Bank of Issue
(ii) It acts as banker to the Government
(iii) It is the banker of other banks
(iv) It regulates the flow of credit

(a) Both (i) and (ii)
(b) Both (iii) and (iv)
(c) All the Above
(d) None of the above



ANSWER: (c) All the Above

The Reserve Bank of India, as the central bank of the country, functions as the sole bank with the right of issuing paper notes, it acts as banker to the Government, it is the banker to other bank and it regulates the flow of credit.


4. Which among the following is incorrect?

a) RBI is the Bank of Issue
b) RBI acts as Banker to the Government
c) RBI is Banker's Bank
d) RBI does not regulate the flow of credit--



ANSWER: d) RBI does not regulate the flow of credit

The Reserve Bank of India, as the central bank of the country, regulates the flow of credit.


5. India is a member of the International Monetary Fund since _____.

a) 1934
b) 1935
c) 1947
d) 1949



ANSWER: c) 1947

Since March, 1934 India is a member of the International Monetary Fund. It has to, therefore, maintain its rate of exchange at the level which it has declared to the IMF. The Reserve Bank takes suitable measures to maintain the value of the rupee at this declared level.


6. Which of the following is true about the restrictions on RBI?

(i) It is not to compete with the commercial banks.
(ii) It is not allowed to pay interest on its deposits.
(iii) It cannot engage directly or indirectly in trade.
(iv) It cannot acquire or advice loans against immovable property.
(v) It is prohibited from purchasing its own shares or the shares of any other bank or any company or granting loans on such security.

(a) only (i),(ii),(iii), and (iv)
(b) only (v)
(c) all the above
(d) none of the above



ANSWER: (c) all the above

Certain restrictions have been imposed on the Reserve Bank as it is a central bank. It is not to compete with the commercial banks. It is not allowed to pay interest on its deposits. It cannot engage directly or indirectly in trade. It cannot also acquire or advice loans against immovable property. It is also prohibited from purchasing its own shares or the shares of any other bank or any company or granting loans on such security.


7. When did the Reserve Bank of India notify the draft regulations relating to the Credit Information Companies (Regulation) Act, 2005?

a) April 5, 2006
b) May 26, 2006
c) June 29, 2007
d) September 30, 2005



ANSWER: a) April 5, 2006

The Reserve Bank of India (RBI) notified the draft regulations relating to the Credit Information Companies (Regulation) Act, 2005 on April 5, 2006. Among the major features of the regulations is the inclusion of stock brokers and telecommunication companies in the category of 'specified users' of services of credit information companies. It is expected that there will be a boost to the development of credit, based on a more reliable information base, once the regulations are finalised.


8. When did the draft guidelines for building grievance redressal mechanism within NBFCs (Non-Banking Financial Companies) publish?

a) April 5, 2006
b) May 26, 2006
c) June 29, 2007
d) September 30, 2005



ANSWER: b) May 26, 2006

The Reserve Bank of India (RBI) published the draft guidelines for building grievance redressal mechanism within NBFCs (Non-Banking Financial Companies) on May 26, 2006. The grievance redressal mechanism would be used to resolve disputes arising out of the decisions of the lending institutions' functionaries. Guidelines have also been outlined by the RBI for putting in place the Fair Practices Codes by all NBFCs.


9. When did the Centre acquire the Reserve Bank of India's entire 59.73% equity stake in the State Bank of India (SBI) at over Rs. 35,531 crore in New Delhi?

a) April 5, 2006
b) May 26, 2006
c) June 29, 2007
d) September 30, 2005



ANSWER: c) June 29, 2007

The Centre acquired the Reserve Bank of India's entire 59.73% equity stake in State Bank of India (SBI) at over Rs. 35,531 crore in New Delhi on June 29, 2007. It is the biggest ever cash purchase. As per the guidelines of the Securities and Exchange Board of India (SEBI), the Government picked up the entire SBI shares held by the RBI at a price of Rs. 1,130.35 a share.


10. According to which guidelines did the Government pick up the entire SBI shares held by the RBI?

a) National Stock Exchange of India
b) Securities Commission
c) Financial Regulations
d) Securities and Exchange Board of India (SEBI)


ANSWER: d) Securities and Exchange Board of India (SEBI)

As per the guidelines of the Securities and Exchange Board of India (SEBI), the Government picked up the entire SBI shares held by the RBI at a price of Rs. 1,130.35 a share.


11. When did the Government appoint for transfer of stake?

a) 29 June
b) 26 May
c) 5 April
d) 1 April



ANSWER: a) 29 June

To facilitate an ordinance published for providing the requisite statutory provisions in the State Bank of India Act, 1955, the Government appointed 29 June as the date for transfer of stake. On the same principle, the Government also acquired RBI's shareholding in National Housing Bank (NHB) and NABARD. The Reserve Bank holds a 72.5% stake in NABARD and 100% stake in NHB.



12. What is the cost of credit expressed as a percentage on a yearly basis called?

a) APR
b) APY
c) WPI
d) None of these


ANSWER: a) APR

The Annual Percentage Rate (APR) is the simplified counterpart to the effective interest rate that the borrower will pay on a loan.


13. What is the percentage rate reflecting the total amount of interest paid on a deposit account called?

a) APR
b) APY
c) WPI
d) None of these



ANSWER: b) APY



14. In which type of banking, electronic financial transactions are done?

a) E-Banking
b) Internet Banking
c) M-Banking
d) Universal Banking



ANSWER: a) E-Banking

E-banking enable financial institution customers, individuals or businesses, to access accounts, transact business, or obtain information on financial products and services.


15. Which one of the following helps the consumers protect their credit identities and recover from identity theft?

a) FACTA
b) FCRA
c) FDCPA
d) FOIA



ANSWER: a) FACTA

The Fair and Accurate Credit Transactions Act (FACTA) of 2003 is a United States federal law. It is passed by the United States Congress on November 22.


16. Which one of the following gives consumers the right to see their credit records and correct mistakes?

a) FACTA
b) FCRA
c) FDCPA
d) FOIA



ANSWER: b) FCRA

The Fair Credit Reporting Act (FCRA) is a Federal law established in 1971 and revised in 1997.


17. Which of the following is the amount of Funds borrowed by the government to meet the expenditures?

a) Fiscal Deficit
b) Current account
c) Fiscal policy
d) Public finance



ANSWER: a) Fiscal Deficit

A country's fiscal deficit is communicated as a percentage of its gross domestic product (GDP).


18. Which one of the following is a set of United State statutes added as Title VIII of the Consumer Credit Protection Act?

a) FACTA
b) FCRA
c) FDCPA
d) FOIA



ANSWER: c) FDCPA

The Fair Debt Collection Practices Act (FDCPA) was approved on September 20, 1977.


19. Which one of the following is open for public inspection and copying?

a) FACTA
b) FCRA
c) FDCPA
d) FOIA



ANSWER: d) FOIA

The Freedom of Information Act (FOIA) is a law that gives the right to access information from the federal government. It is described as the law keeps citizens know about their government.


20. Which one of the following belongs to the time when a company makes the first offering of the shares to the public?

a) CSO
b) IPO
c) REPO
d) WTO



ANSWER: b) IPO

Initial Public Offering (IPO) or stock market launch is a type of public offering. A private company transforms into a public company through this process.


21. Which one of the following is a financial ratio that gives a measure of a company's ability to meet its financial losses?

a) Cash Reverse Ratio
b) Leverage Ratio
c) Statutory Liquidity Ratio
d) Loan-to-Value Ratio


ANSWER: b) Leverage Ratio

It is meant to evaluate a company's debt levels.



22. Which one of the following is the ratio of the loan principal to the appraised value?

a) Combined Loan To Value: (CLTV) ratio
b) Loan-to-Value Ratio
c) Mortgage Loan
d) Statutory Liquidity Ratio



ANSWER: b) Loan-to-Value Ratio

The loans with LTV ratios higher than 100% are called underwater mortgages.


23. What is the product of the share price and number of the company's outstanding ordinary shares?

a) Market Capitalization
b) Market Price
c) Market Trend
d) Treasury Stock



ANSWER: a) Market Capitalization

Market capitalization or market cap reflects the equity value of a company.


24. Which one of the following pools money from various investors in order to purchase securities?

a) Fund derivative
b) Money fund
c) Mutual fund
d) Pension fund



ANSWER: c) Mutual fund

Investors in a mutual fund pay the fund̢۪s expenses, which reduce the fund's returns and performance.


25. Which one of the following is the Federal regulatory agency that charters and supervises Federal credit unions?

a) AIRCSC
b) ARC
c) CAG
d) NCUA



ANSWER: d) NCUA

NCUA stands for National Credit Union Administration.


26. Which one of the following is used when describing the monthly charges on a mortgage?

a) BIS
b) CPI
c) FII
d) PITI



ANSWER: d) PITI

PITI is the common acronym for principal, interest, taxes, and insurance.


27. Which one of the following allow bank customers to effect transfers of funds from their deposit accounts and other financial transactions at retail establishments?

a) CBS
b) DBS
c) IBS
d) POS



ANSWER: d) POS

At the Point of Sale (POS), the retailer would calculate the amount owed by the customer and provide options for the customer to make payment.


28. Which is the policy that offers multiple coverage combinations for both buildings and contents?

a) PRP
b) REPO
c) UNDP
d) WPI



ANSWER: a) PRP

PRP stands for Preferred Risk Policy.


29. Which one of the following requires lenders to provide "good faith" estimates of settlement costs?

a) FOIA
b) NCUA
c) RESPA
d) TILA



ANSWER: c) RESPA

The Real Estate Settlement Procedures Act (RESPA) ensures that consumers are provided with helpful information about the cost of the mortgage settlement and protected from unnecessarily high settlement charges caused by certain abusive practices.


30. Which one of the following is the rate at which the RBI lends money to commercial banks in the event of any shortfall of funds?

a) Benchmark Prime Lending Rate
b) Annual Percentage Rate
c) Bank Rate
d) Repo Rate



ANSWER: d) Repo Rate

If Repo rate increases it becomes expensive to borrow money from RBI and vice versa.


31. Which one of the following requires lenders to provide standardized information?

a) TILA
b) RESPA
c) NCUA
d) UCC



ANSWER: a) TILA

The Truth in Lending Act (TILA) is a Federal law that requires lenders to provide standardized information so that borrowers can compare loan terms. Lenders must provide information on what credit will cost the borrowers, when charges will be imposed, and what the borrower's rights are as a consumer.


32. Which one of the following is a set of statutes enacted to provide consistency among the States' commercial laws?

a) AIRSCS
b) ARC
c) NSC
d) UCC



ANSWER: d) UCC

Uniform Commercial Code (UCC) includes negotiable instruments, sales, stock transfers, trust and warehouse receipts, and bills of lading.


33. When financial institutions and banks undertake activities related to banking like investment, issue of debit and credit card etc then it is known as _____________________.

a) Internet banking
b) Universal banking
c) Virtual Banking
d) Wholesale banking



ANSWER: b) Universal banking

Universal banks may offer credit, loans, deposits, asset management, investment advisory, payment processing, securities transactions, underwriting and financial analysis.


34. Which one of the following is controlled by the world wide web?

a) Universal banking
b) Virtual Banking
c) Wholesale Banking
d) None of these



ANSWER: b) Virtual Banking

Internet banking is known as virtual banking. It is called so because it has no bricks and boundaries.


35. Which one of the following focuses on the financial needs of the institutional clients and the industry?

a) Universal banking
b) Virtual Banking
c) Internet banking
d) Wholesale banking



ANSWER: d) Wholesale banking

Some services might include currency conversion, working capital financing and large trade transactions.



36. The performance of which scheme does the National Housing Bank monitor?

a) Liberalized Finance Scheme
b) Golden Jubilee Rural Housing Finance Scheme
c) Energy Efficient Housing Finance Scheme
d) Finance scheme for indirect loans



ANSWER: b) Golden Jubilee Rural Housing Finance Scheme

The National Housing Bank monitors the performance of the Golden Jubilee Rural Housing Finance Scheme implemented through the scheduled banks of HDFC and the Cooperative Sector Institutions. During 2009-10, 3.9 lakh dwelling units were successfully financed against a target of 3.5 lakh units.


37. When did the National Bank of Agriculture and Rural Development establish?

a) July, 1982
b) July, 1969
c) June, 1951
d) June, 1961



ANSWER: a) July, 1982

In the field of rural credit and agricultural development, establishment of NABARD is a major event. The National bank of Agriculture and Rural Development as an apex body with the responsibility for the overall development, policy, planning and financial support for agriculture and rural development was established on 12th July 1982.


38. When did the government acquire RBI's shareholding (72.5%) in NABARD?

a) May, 2008
b) June, 2008
c) August, 2008
d) March, 2009



ANSWER: b) June, 2008

In June, 2008 the government acquired 72.5 percentage of RBI's shareholding in NABARD.


39. The duration of fund raising from the commercial banks to the extent of RIDFs shortfall in agricultural lending is _________.

a) daily
b) weekly
c) monthly
d) yearly



ANSWER: d) yearly

RIDF was set up in NABARD in 1995-96 to boost public sector investment in agriculture and rural infrastructure. The fund is raised yearly from the commercial banks to the extent of their shortfall in agricultural lending. The corpus of RIDF I-XV amounted to Rs. 1,03,718 crore by March 31, 2010.


40. When did the Government of India set up the Export-Import Bank of India?

a) January, 1982
b) January, 1993
c) March, 1971
d) June, 1969



ANSWER: a) January, 1982

In January, 1982 recognising the importance of exports in India's development programmes, the Government of India set up the Export-Import Bank of India as a statutory corporation owned completely by the Union Government.


41. The main objectives of the Export-Import Bank (EXIM Bank) are:

(i) to ensure an integrated and coordinated approach to solving the problems of exporters
(ii) to provide special attention to capital goods export and export of technical services
(iii) to tap domestic and overseas markets for resources, undertake development and finance activities in the areas of exports.
(iv) to provide financial assistance to the exporters and importers and act as the principal financial institution for coordinating the working of other institutions engaged in financing exports and imports.
(v) to provide refinance facilities to commercial banks and financial institutions against their export-import financing activities

(a) both (i) and (ii)
(b) only (iii), (iv), and (v)
(c) All the above
(d) None of the above



ANSWER: (c) All the above

The main objectives of the Export-Import Bank (EXIM Bank) are to ensure an integrated and coordinated approach to solving the problems of exporters, providing special attention to capital goods export and export of technical services, and to tap domestic and overseas markets for resources, undertaking development and financing activities in the areas of exports. The EXIM Bank provides financial assistance to the exporters and importers and acts as the principal financial institution for coordinating the working of other institutions engaged in financing exports and imports. It also provides refinance facilities to commercial banks and financial institutions against their export-import financing activities.


42. Which bank had the highest concentrations of operations overseas in 2010?

a) Bank of Baroda
b) Bank of India
c) State Bank of India
d) Union Bank of India



ANSWER: a) Bank of Baroda

Bank of Baroda had the highest concentrations of operations with 46 branches, 8 subsidiaries, 3 representative offices and 1 joint venture bank, followed by State Bank of India with 42 branches, 5 subsidiaries, 4 joint ventures and 8 representative offices, and Bank of India with 24 branches, 3 subsidiaries, 1 joint venture bank and 5 representative offices.


43. When did the Government of India appoint a committee under the chairmanship of Shri M.Narasimham to strengthen the banking system?

a) May, 2006
b) April, 1998
c) December, 1997
d) September, 2005



ANSWER: c) December, 1997

In December, 1997, the Government of India appointed a committee under the chairmanship of Shri M.Narasimham to strengthen the banking system which submitted its report in April, 1998. The government accepted some of its recommendations, viz. prudential accounting norms, and classification of government-guaranteed advances.


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