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

The correct answer is  Only 1 and 3.

In News

• EMI is a fixed amount paid monthly by the borrower to the lender on a specified date.
• The Amortization Schedule shows the breakup of principal and interest in each EMI payment.

Key Points

• EMI amount is generally constant throughout the loan tenure.
• EMI includes both principal repayment and interest charges.
• Amortization means spreading payments over multiple periods.
• The amortization schedule helps borrowers understand how much principal and interest they pay monthly.

Additional Information

• EMI is widely used in personal loans, home loans, and auto loans.
• The interest component is higher in initial EMIs and decreases over time.
• The principal component increases gradually as the loan matures.
• Borrowers can use EMI calculators to estimate monthly payments before taking loans.

The correct answer is 1 and 3 only.

In News

• Borrowers can withdraw funds as needed up to the credit limit and pay interest only on the amount withdrawn.
• Cash Credit accounts are advances secured by the pledge or hypothecation of goods or products.

Key Points

• Overdraft and Cash Credit both allow withdrawal up to a sanctioned credit limit.
• Interest is charged only on the actual amount withdrawn, not the total limit.
• The main difference lies in the type of security: Cash Credit is secured by goods (pledge/hypothecation).
• Overdraft may or may not be secured; it typically refers to account holders overdrawing their accounts.
• Cash Credit is commonly used in working capital finance for business purposes.

Additional Information

• Hypothecation means creating a charge on goods without transferring possession.
• Pledge involves transferring possession of goods to the lender as security.
• Overdraft facilities are usually provided against current or savings bank accounts.
• Cash Credit is mostly for businesses requiring regular working capital finance.

The correct answer is 1 and 2 only.

In News

• MCLR was introduced on 1st April 2016 to replace the Base Rate system and provide cheaper loans to borrowers.
• The components of MCLR include marginal cost of funds, negative carry on CRR, operating costs, and tenor premium.

Key Points

• MCLR aims to improve the transmission of policy rates to borrowers.
• It replaced the Base Rate system for better transparency in lending rates.
• The marginal cost of funds is the cost to the bank for raising funds.
• Negative carry on CRR refers to the cost banks bear on the cash reserve ratio.
• Tenor premium accounts for the risk of lending for different time periods.

Additional Information

• MCLR is reviewed and published by banks monthly or more frequently.
• The Reserve Bank of India mandates banks to use MCLR for pricing loans.
• MCLR improves interest rate transparency compared to the older systems.
• Borrowers can negotiate loan interest rates based on MCLR components.

The correct answer is  All 1, 2, and 3.

In News

• BPLR (Benchmark Prime Lending Rate) was not transparent and caused disparity in loan interest rates among borrowers.
• RBI set up a working group chaired by Shri Deepak Mohanty to review the BPLR system in 2009.
• The committee recommended the introduction of the Base Rate system to improve transparency in credit pricing.

Key Points

• BPLR was the earlier benchmark lending rate used by banks before 2010.
• The Base Rate system replaced BPLR with effect from July 1, 2010.
• Base Rate ensures uniformity and transparency in lending rates offered to borrowers.
• The shift aimed to reduce arbitrary lending practices and bring clarity in interest rate calculation.

Additional Information

• The Base Rate system requires banks to disclose minimum interest rates for lending to customers.
• Post-Base Rate, Marginal Cost of Funds based Lending Rate (MCLR) was introduced in 2016 for better interest rate transmission.
• BPLR system often led to non-uniform lending practices across banks.
• RBI continues to monitor lending rates to ensure transparency and fairness.

The correct answer is Only 1 and 3.

In News

• The drawer of a cheque is an individual account holder, while the drawer of a demand draft is normally a scheduled bank.
• A cheque can be stopped by issuing a stop payment order, but no one can stop a demand draft.

Key Points

• Cheque payment is not certain; it can bounce due to insufficient funds.
• Demand draft payment is certain as it is prepaid by the drawer bank.
• Cheque is defined under the Negotiable Instruments Act, 1881, whereas demand draft is not defined under this Act.
• A cheque drawer can stop payment by issuing a stop order.

Additional Information

• Demand drafts are often used for secure payment where payment assurance is required.
• Cheques involve three parties: drawer, drawee (bank), and payee.
• Demand drafts are drawn by the bank on itself or another bank.
• Stop payment of a cheque requires prior instruction from the drawer to the bank.

The correct answer is option 1 i.e., 1990

• SIDBI is the principal development financial institution for promotion, financing, and development of Micro, Small, and Medium Enterprises (MSME) sector in India.
• It was established on April 2, 1990, through an Act of Parliament.
• The headquarters of the SIDBI is located in Lucknow, Uttar Pradesh.
• It aims to facilitate and strengthen credit flow to MSMEs and address both financial and developmental gaps in the MSME eco-system across the country.
• It coordinates the functions of institutions engaged in similar activities.

The correct answer is Allahabad Bank.

• Allahabad Bank (nationalized bank) is the oldest joint stock bank in India.
• It was founded in Allahabad in 1865 and its headquarters in Kolkata, India.

Key Points

The correct answer is 14.

Key Points

• Nationalisation of Bank in India:
  • On July 19, 1969, Indira Gandhi who was both Prime Minister and Finance Minister at that time decided to nationalise the 14 largest private banks of the country. Hence, Option 1 is correct.
  • The largest and the oldest bank which is still in existence is the State Bank of India (SBI).
    • It originated and started working as the Bank of Calcutta in mid-June 1806.
    • In 1809, it was renamed the Bank of Bengal.
    • This was one of the three banks founded by a presidential government, the other two were the Bank of Bombay in 1840 and the Bank of Madras in 1843.
  • The three banks were merged in 1921 to form the Imperial Bank of India, which upon India's independence, became the State Bank of India in 1955.
  • For many years, the presidency banks had acted as quasi-central banks, as did their successors, until the Reserve Bank of India was established in 1935, under the Reserve Bank of India Act, 1934.
  • In 1960, the State Banks of India was given control of eight state-associated banks under the State Bank of India (Subsidiary Banks) Act, 1959. These are now called associate banks. 
  • In 1969, the Government of India nationalised 14 major private banks; one of the big banks as Bank of India. In 1980, 6 more private banks were nationalised.
  • These nationalised banks are the majority of lenders in the Indian economy.
  • They dominate the banking sector because of their large size and widespread networks. 

• Allahabad Bank is the oldest public-Sector bank of India.
• It was established in the year 1865.
• Its current chairman of the bank is SS Mallikarjuna Rao.

Allahabad Bank has been merged with Indian Bank.

The correct answer is option 2 i.e Manmohan Singh.

• Manmohan Singh is the only Prime Minister to have also served as the Governor of RBI.
• He was the Governor of RBI from 1982-1985.

Facts to remember about RBI:

• The Reserve Bank of India was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934.
• The Central Office of the Reserve Bank was initially established in Kolkata 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 nationalisation in 1949, the Reserve Bank is fully owned by the Government of India.
• The Reserve Bank of India (RBI) is India's central bank, which controls the issue and supply of the Indian rupee.
• RBI is the regulator of the entire Banking in India.
• Shaktikanta Das is the current governor of RBI.
• RBI's headquarters are in Mumbai. The RBI has four zonal offices at Chennai, Delhi, Kolkata and Mumbai.

Reserve Bank of India was established in the year 1935 after the recommendation of the Royal Commission under the chairmanship of Hilton Young.

• It was set up in 1935 under the Reserve Bank of India Act,1934.
• Until the Monetary Policy Committee was established in 2016, it also controlled monetary policy in India.
• The Reserve Bank of India is India's central bank, which controls the issue and supply of the Indian rupee.
• RBI was established in Calcutta but was moved to Bombay in 1937.

The correct answer Tertiary sector.

Key Points

• Banking comes under the tertiary sector.
• The tertiary sector, also known as the service sector includes transport, banking, storage, communication, etc.
• The primary sector is the one which is dependent on nature and makes use of raw materials. It includes agriculture, fishing, mining, etc.
• The secondary sector is concerned with manufacturing, construction, processing, etc.

The correct answer is ₹2,00,000.

Key Points

• Rs. 2,00,000 is the minimum amount that can be remitted through Real Time Gross Settlement (RTGS).
• The acronym "RTGS" stands for Real-Time Gross Settlement, which can be described as a mechanism where fund transfers are settled continuously and in real-time, individually on a transaction basis (without netting).
• "Real-Time" means the delivery of instructions at the time of receipt; "Gross Settlement" means the settlement of instructions for the transfer of funds happens separately.
• The RTGS system is intended specifically for large-value transactions.

The correct answer is 137%.

Key Points

• The allocation towards health and well-being was increased by 137% over the previous year in Union Budget 2021-22. 
• According to analysts, one of the sectors that have continually been neglected is "health."
• However, in her Budget 2021-22, Union Finance Minister Nirmala Sitharaman announced a 137 percent increase in the allocation for health from the previous year's budget estimate of over Rs. 94,000 crore (Rs. 94,452 crore) and a 118 percent increase from the previous year's revised budget of over Rs. 1.02 lakh crore (Rs. 1,02,873 crore).

Important Points

• The 2.23 lakh crore spending in Budget 2021 comprises allocations to the Ministry of Ayurveda, Yoga and Naturopathy, Unani, Siddha, and Homoeopathy, as well as the Ministry of Health and Family Welfare (MoHFW), which is the country's focal ministry for healthcare (AYUSH).
• To calculate the spending for health and wellness, the Finance Minister combined the amounts given under several categories of other ministries. 

• The National Bank for Agriculture and Rural Development (NABARD) is a financial, development institution and it is headquartered in Mumbai.
• The institution deals with Operations and Policy Planning in the Agriculture sector of rural areas. 
• It was formed on 12 July 1982 on the recommendations of the B. Sivaramman Committee.
• It was established under the National Bank for Agriculture and Rural Development (NABARD) Act 1981.