Banking current affairs form a crucial part of the General Awareness section in highly competitive examinations like IBPS PO, SBI Clerk, and RBI Grade B. This dynamic topic covers recent developments in the national and global financial sectors, heavily focusing on Reserve Bank of India (RBI) monetary policy updates, regulatory frameworks, and penalty impositions. It also encompasses rapid digital banking innovations such as UPI enhancements, the Digital Rupee (e₹), and new regulatory portals alongside major bank mergers, leadership appointments, and government financial schemes. Staying thoroughly updated with these macroeconomic changes is essential for aspirants to understand India’s evolving financial landscape. Regular practice of these objective questions ensures high accuracy, prevents confusion with outdated data, and significantly boosts overall exam scores.
1. What is the primary function of the Reserve Bank of India (RBI)?
Correct Answer: b) To manage the monetary policy of India
Explanation:
The primary function of the RBI is to formulate, implement, and monitor India's monetary policy with the objective of maintaining price stability while keeping in mind the objective of growth.
2. What does the 'Repo Rate' signify in the Indian banking system?
Correct Answer: b) The rate at which RBI lends short-term funds to commercial banks
Explanation:
The Repo (Repurchase) Rate is the rate at which the Reserve Bank of India lends short-term money to commercial banks against government securities.
3. What is the statutory limit for the tenure of the Governor of the Reserve Bank of India upon initial appointment?
Correct Answer: b) 3 years
Explanation:
The Governor and Deputy Governors of the RBI are initially appointed for a term of three years, which can be extended further by the government.
4. In which year was the Reserve Bank of India nationalized?
Correct Answer: c) 1949
Explanation:
The Reserve Bank of India was established in 1935 but was nationalized on January 1, 1949, under the Reserve Bank (Transfer to Public Ownership) Act, 1948.
5. What is the flexible inflation target set by the Government of India in consultation with the RBI?
Correct Answer: b) 4% with a tolerance band of +/- 2%
Explanation:
The inflation target is set at 4% Consumer Price Index (CPI) inflation, with an upper tolerance limit of 6% and a lower tolerance limit of 2%.
6. How many members constitute the Monetary Policy Committee (MPC) of the RBI?
Correct Answer: c) 6 members
Explanation:
The MPC consists of 6 members: three officials from the RBI, including the Governor who acts as the ex-officio chairperson, and three external members appointed by the Government of India.
7. Who is responsible for the issuance of the One Rupee note in India?
Correct Answer: b) Ministry of Finance
Explanation:
Unlike other currency notes which are issued by the RBI, the One Rupee note is issued by the Ministry of Finance and bears the signature of the Finance Secretary.
8. The Foreign Exchange Management Act (FEMA) was enacted in which year to replace FERA?
Correct Answer: c) 1999
Explanation:
FEMA was enacted in 1999 to consolidate and amend the law relating to foreign exchange, effectively replacing the draconian Foreign Exchange Regulation Act (FERA).
9. What is the maximum limit of deposit insurance cover provided by DICGC per depositor per bank?
Correct Answer: c) Rs. 5 Lakhs
Explanation:
The Deposit Insurance and Credit Guarantee Corporation (DICGC) provides insurance cover up to Rs. 5 Lakhs per depositor for deposits maintained in a bank.
10. The Reserve Bank of India issues currency notes under which system?
Correct Answer: b) Minimum Reserve System
Explanation:
Since 1957, the RBI issues currency under the Minimum Reserve System, requiring it to maintain a minimum backing of Rs. 200 crore in gold and foreign exchange reserves.
11. What does the acronym 'UPI' stand for in the Indian digital payment ecosystem?
Correct Answer: b) Unified Payments Interface
Explanation:
UPI stands for Unified Payments Interface, an instant real-time payment system developed by NPCI to facilitate inter-bank peer-to-peer and person-to-merchant transactions.
12. In which year was the National Payments Corporation of India (NPCI) incorporated?
Correct Answer: b) 2008
Explanation:
NPCI was incorporated in December 2008 as an umbrella organization for operating retail payments and settlement systems in India.
13. What is the fundamental nature of the e-RUPI payment mechanism?
Correct Answer: b) A purpose-specific, prepaid digital voucher
Explanation:
e-RUPI is a cashless and contactless instrument for digital payment. It acts as a prepaid, purpose-specific e-voucher delivered to the mobile phones of beneficiaries via SMS or QR code.
14. What is the maximum limit per transaction for offline payments via UPI Lite?
Correct Answer: b) Rs. 500
Explanation:
The RBI enhanced the per-transaction limit for UPI Lite from Rs. 200 to Rs. 500 to promote small-value digital payments in offline mode.
15. What is the Central Bank Digital Currency (CBDC) launched by the RBI known as?
Correct Answer: a) e-Rupee (e₹)
Explanation:
The Central Bank Digital Currency introduced by the RBI is known as the e-Rupee or Digital Rupee (e₹), serving as a digital token representing legal tender.
16. What is the primary function of the National Financial Switch (NFS) operated by NPCI?
Correct Answer: c) Routing of ATM transactions across banks
Explanation:
The National Financial Switch (NFS) is the largest network of shared automated teller machines (ATMs) in India, facilitating interoperable cash withdrawals and other services.
17. What does 'AePS' stand for in the context of Indian banking?
Correct Answer: b) Aadhaar Enabled Payment System
Explanation:
AePS is a bank-led model which allows online interoperable financial transactions at Point of Sale (PoS) through the Business Correspondent (BC) using Aadhaar authentication.
18. Which technology does the FASTag system utilize for electronic toll collection?
Correct Answer: b) RFID (Radio Frequency Identification)
Explanation:
FASTag uses RFID technology to enable direct toll payments from linked prepaid or savings accounts while the vehicle is in motion.
19. What is the primary purpose of the NACH (National Automated Clearing House) system?
Correct Answer: b) To facilitate bulk, repetitive transactions like salaries and EMIs
Explanation:
NACH is implemented by NPCI to facilitate bulk, electronic, and repetitive transactions such as distribution of dividends, interest, salary, and collection of EMIs and utility bills.
20. The BHIM (Bharat Interface for Money) application relies on which underlying payment system?
Correct Answer: c) UPI
Explanation:
BHIM is an Indian mobile payment app developed by the National Payments Corporation of India, based on the Unified Payments Interface (UPI).
21. What is the overall Priority Sector Lending (PSL) target for domestic commercial banks in India?
Correct Answer: c) 40% of Adjusted Net Bank Credit (ANBC)
Explanation:
Domestic commercial banks and foreign banks with 20 or more branches are required to allocate 40% of their ANBC to the priority sector.
22. Within the 40% PSL target for commercial banks, what specific sub-target is mandated for the Agriculture sector?
Correct Answer: d) 18%
Explanation:
Banks are required to allocate 18% of their Adjusted Net Bank Credit (ANBC) to the agriculture sector under the Priority Sector Lending norms.
23. Under the Pradhan Mantri Jan Dhan Yojana (PMJDY), what is the maximum overdraft facility available to eligible account holders?
Correct Answer: c) Rs. 10,000
Explanation:
The overdraft limit for PMJDY accounts was enhanced from Rs. 5,000 to Rs. 10,000 to provide better financial support to account holders.
24. What is the main objective of the Lead Bank Scheme introduced by the RBI?
Correct Answer: b) To promote financial inclusion and coordinate credit planning at the district level
Explanation:
The Lead Bank Scheme assigns a specific district to a bank to act as a consortium leader to coordinate the efforts of all credit institutions to increase financial inclusion and regional development.
25. Under the Pradhan Mantri MUDRA Yojana, what is the maximum loan amount available under the 'Shishu' category?
Correct Answer: b) Up to Rs. 50,000
Explanation:
MUDRA loans are divided into three categories. The 'Shishu' category covers loans up to Rs. 50,000 for starting a micro-business.
26. Which category under the MUDRA scheme provides loans ranging from Rs. 50,001 to Rs. 5,00,000?
Correct Answer: b) Kishore
Explanation:
The 'Kishore' category under the MUDRA scheme provides loans from Rs. 50,001 up to Rs. 5 Lakhs.
27. Which category under the MUDRA scheme provides loans ranging from Rs. 5,00,001 to Rs. 10,00,000?
Correct Answer: c) Tarun
Explanation:
The 'Tarun' category covers loans above Rs. 5 Lakhs and up to Rs. 10 Lakhs.
28. In which year was the National Bank for Agriculture and Rural Development (NABARD) established?
Correct Answer: b) 1982
Explanation:
NABARD was established on July 12, 1982, on the recommendations of the B. Sivaraman Committee to promote sustainable and equitable agriculture and rural development.
29. The Rural Infrastructure Development Fund (RIDF) is maintained by which institution?
Correct Answer: b) National Bank for Agriculture and Rural Development (NABARD)
Explanation:
RIDF was instituted in NABARD in 1995-96 with the objective of providing low-cost fund support to state governments for rural infrastructure projects.
30. Which institution launched the Self-Help Group (SHG) Bank Linkage Programme in India?
Correct Answer: b) National Bank for Agriculture and Rural Development (NABARD)
Explanation:
NABARD launched the SHG-Bank Linkage Programme in 1992, which has become the world's largest microfinance project.
31. An asset is classified as a Non-Performing Asset (NPA) when the principal or interest payment remains overdue for a continuous period of more than how many days?
Correct Answer: c) 90 days
Explanation:
According to RBI guidelines, a loan account is classified as an NPA if interest or principal installment remains overdue for a period of more than 90 days.
32. What defines a 'Substandard Asset' in banking terminology?
Correct Answer: a) An asset that has been an NPA for a period less than or equal to 12 months
Explanation:
An NPA is classified as a Substandard Asset if it has remained in the NPA category for a period less than or equal to 12 months.
33. An asset is classified as a 'Doubtful Asset' when it has remained in the substandard category for a period of:
Correct Answer: c) 12 months
Explanation:
An asset is categorized as doubtful if it has remained in the substandard category for 12 months.
34. Which of the following best describes a 'Loss Asset'?
Correct Answer: b) An asset identified as uncollectible by the bank or auditors, but not completely written off
Explanation:
A loss asset is considered uncollectible and of such little value that its continuance as a bankable asset is not warranted, although there may be some salvage value.
35. In which year was the SARFAESI Act, which empowers banks to recover non-performing assets without court intervention, enacted?
Correct Answer: b) 2002
Explanation:
The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act was passed in 2002.
36. The Insolvency and Bankruptcy Code (IBC), a landmark reform for time-bound resolution of stressed assets, was introduced in which year?
Correct Answer: b) 2016
Explanation:
The IBC was enacted in 2016 to consolidate and amend the laws relating to reorganization and insolvency resolution of corporate persons, partnership firms, and individuals.
37. What is the primary function of the National Asset Reconstruction Company Limited (NARCL)?
Correct Answer: b) To act as a 'Bad Bank' by taking over large value NPAs from banks
Explanation:
NARCL has been incorporated as a 'Bad Bank' under the Companies Act to clean up the banking system by acquiring stressed assets and resolving them.
38. In banking restructuring, what does the term 'Haircut' refer to?
Correct Answer: c) The amount of loan a bank agrees to write off while settling an NPA
Explanation:
A 'haircut' in finance refers to the loss or the amount of debt waived by lenders while settling a stressed asset to recover whatever is possible.
39. What does the Provisioning Coverage Ratio (PCR) indicate for a bank?
Correct Answer: b) The percentage of funds set aside to cover losses on NPAs
Explanation:
PCR is the ratio of provisioning made by a bank to its gross non-performing assets, indicating its financial resilience against bad loans.
40. What is the score range provided by CIBIL (Credit Information Bureau India Limited) to reflect an individual's creditworthiness?
Correct Answer: b) 300 to 900
Explanation:
The CIBIL score is a 3-digit numeric summary of credit history, ranging from 300 to 900, where a higher score indicates better creditworthiness.
41. Which of the following best defines the Cash Reserve Ratio (CRR)?
Correct Answer: b) The specified fraction of total deposits that commercial banks must hold as cash balances with the RBI
Explanation:
CRR is the minimum fraction of the total deposits of customers that commercial banks must hold as cash reserves with the central bank.
42. Under the Statutory Liquidity Ratio (SLR), banks are required to maintain a portion of their Net Demand and Time Liabilities (NDTL) in which form?
Correct Answer: b) Liquid assets such as cash, gold, and approved government securities
Explanation:
SLR mandates banks to maintain a reserve in the form of liquid assets like cash, gold, and RBI-approved unencumbered government securities.
43. What is the purpose of the Marginal Standing Facility (MSF) introduced by the RBI?
Correct Answer: a) To allow banks to borrow overnight funds against approved government securities in an emergency
Explanation:
MSF is a special window for banks to borrow overnight funds from the RBI against approved government securities when interbank liquidity dries up completely.
44. The Liquidity Adjustment Facility (LAF) used by the RBI primarily consists of which two tools?
Correct Answer: b) Repo Rate and Reverse Repo Rate
Explanation:
LAF is a monetary policy tool that allows banks to borrow money through repurchase agreements (repos) or make loans to the RBI through reverse repo agreements.
45. What do Open Market Operations (OMO) by the RBI entail?
Correct Answer: b) Buying and selling of government securities in the open market to regulate liquidity
Explanation:
OMO is the purchase and sale of government securities by the central bank to inject or suck out liquidity from the economy.
46. What is the primary objective of the Variable Rate Reverse Repo (VRRR) auctions conducted by the RBI?
Correct Answer: b) To absorb surplus liquidity from the banking system
Explanation:
The RBI uses VRRR auctions as a tool to absorb excess liquidity from the banking system, helping to manage short-term interest rates.
47. How does MCLR (Marginal Cost of Funds based Lending Rate) differ from the older Base Rate system?
Correct Answer: b) MCLR incorporates the marginal cost of funds, making it more responsive to RBI rate cuts
Explanation:
MCLR is the internal benchmark rate that relies heavily on the marginal cost of arranging new funds, making loan pricing more transparent and responsive to RBI policy rate changes.
48. The External Benchmark Lending Rate (EBLR) system mandates banks to link retail and MSME loans to an external benchmark. Which of the following is commonly used?
Correct Answer: b) RBI Repo Rate
Explanation:
Under the EBLR regime, banks link their lending rates to external benchmarks such as the RBI's Repo rate, 3-month or 6-month T-Bill yield to ensure faster transmission of policy rates.
49. In the Indian money market, what is the duration of 'Call Money'?
Correct Answer: a) 1 day / overnight
Explanation:
Call Money refers to funds borrowed or lent for a very short period, strictly for 1 day or overnight.
50. What is the duration of 'Notice Money' in the money market?
Correct Answer: b) 2 to 14 days
Explanation:
When money is borrowed or lent in the inter-bank market for a period between 2 days and 14 days, it is referred to as Notice Money.
51. What is the maximum balance a customer can hold at the end of the day in a Payments Bank account?
Correct Answer: c) Rs. 2,00,000
Explanation:
The RBI increased the maximum end-of-day balance limit for Payments Banks from Rs. 1 lakh to Rs. 2 lakh to further their ability to cater to their customers.
52. Which of the following products is a Payments Bank NOT allowed to issue to its customers?
Correct Answer: b) Credit Cards
Explanation:
Payments Banks are not permitted to engage in lending activities; therefore, they cannot issue credit cards or provide loans.
53. What is the minimum paid-up equity capital requirement for setting up a Payments Bank in India?
Correct Answer: b) Rs. 100 Crore
Explanation:
As per RBI guidelines, the minimum paid-up equity capital required to establish a Payments Bank is Rs. 100 crore.
54. What is the Priority Sector Lending (PSL) target set for Small Finance Banks (SFBs)?
Correct Answer: c) 75% of ANBC
Explanation:
Small Finance Banks are required to extend 75% of their Adjusted Net Bank Credit (ANBC) to the priority sector, compared to 40% for scheduled commercial banks.
55. What is the shareholding pattern (Central Govt : State Govt : Sponsor Bank) of a Regional Rural Bank (RRB)?
Correct Answer: a) 50% : 15% : 35%
Explanation:
The capital of an RRB is contributed in the proportion of 50% by the Central Government, 15% by the concerned State Government, and 35% by the Sponsor Bank.
56. Which was the first Regional Rural Bank established in India?
Correct Answer: c) Prathama Bank
Explanation:
Prathama Bank, with its head office in Moradabad, Uttar Pradesh, was the first RRB established on October 2, 1975.
57. A bank is classified as a 'Scheduled Commercial Bank' if it is included in which schedule of the Reserve Bank of India Act, 1934?
Correct Answer: b) Second Schedule
Explanation:
Scheduled banks are those which are included in the Second Schedule of the Reserve Bank of India Act, 1934.
58. The term 'Shadow Banking' generally refers to the activities of which entities in the financial system?
Correct Answer: c) Non-Banking Financial Companies (NBFCs)
Explanation:
Shadow banking refers to financial activities performed by non-bank financial intermediaries (like NBFCs) that provide services similar to traditional commercial banks but outside normal banking regulations.
59. Which of the following is a primary difference between a commercial bank and an NBFC?
Correct Answer: b) NBFCs cannot accept demand deposits
Explanation:
A key difference is that NBFCs cannot accept demand deposits (like savings or current accounts), cannot issue cheques drawn on themselves, and do not form part of the payment and settlement system.
60. What does the term 'White Label ATM' mean?
Correct Answer: a) An ATM owned and operated by a non-banking entity
Explanation:
ATMs set up, owned, and operated by non-banking entities under RBI authorization are known as White Label ATMs.
61. What is the minimum amount that can be remitted through the Real Time Gross Settlement (RTGS) system?
Correct Answer: d) Rs. 2,00,000
Explanation:
RTGS is meant for large-value transactions. The minimum amount to be remitted through RTGS is Rs. 2,00,000, with no upper ceiling.
62. How are transactions settled in the National Electronic Funds Transfer (NEFT) system?
Correct Answer: b) In half-hourly batches
Explanation:
NEFT operates on a Deferred Net Settlement basis, settling transactions in half-hourly batches throughout the day.
63. Which organization manages and operates the Immediate Payment Service (IMPS) in India?
Correct Answer: c) National Payments Corporation of India (NPCI)
Explanation:
IMPS is managed by the NPCI. It is an instant interbank electronic fund transfer service available 24x7.
64. Where is the headquarters of SWIFT (Society for Worldwide Interbank Financial Telecommunication) located?
Correct Answer: c) La Hulpe, Belgium
Explanation:
SWIFT, a massive messaging network banks use to securely transmit information and instructions, is headquartered in La Hulpe, Belgium.
65. An IFSC (Indian Financial System Code) consists of how many alphanumeric characters?
Correct Answer: c) 11 characters
Explanation:
The IFSC is an 11-character alphanumeric code used to uniquely identify bank branches participating in online fund transfer systems like NEFT, RTGS, and IMPS.
66. How many digits does a MICR (Magnetic Ink Character Recognition) code on a cheque have?
Correct Answer: a) 9 digits
Explanation:
The MICR code is a 9-digit code. The first three digits represent the city, the next three represent the bank, and the final three represent the branch.
67. What is the primary objective of the Cheque Truncation System (CTS)?
Correct Answer: c) To stop the physical movement of the cheque by sending its electronic image instead
Explanation:
CTS involves sending an electronic image of the cheque along with critical magnetic data, removing the need for physical movement of the cheque to the drawee branch.
68. A cheque issued by a bank customer is valid for how many months from the date of issue before it becomes stale?
Correct Answer: b) 3 months
Explanation:
According to RBI directives, a cheque, draft, or pay order is valid for a period of 3 months from the date of issue.
69. What does drawing two parallel transverse lines on the face of a cheque (crossing) mandate?
Correct Answer: c) The amount must be paid only into a bank account
Explanation:
Crossing a cheque ensures that the money is not paid over the counter but is instead deposited directly into the bank account of the payee.
70. A Legal Entity Identifier (LEI) code, made mandatory by RBI for large value cross-border transactions, comprises how many characters?
Correct Answer: b) 20 characters
Explanation:
The LEI is a 20-character global reference number conceived to uniquely identify parties to financial transactions globally.
71. What is the maximum maturity period of a Treasury Bill (T-Bill) issued by the Government of India?
Correct Answer: c) 364 days
Explanation:
Treasury Bills are short-term debt instruments issued by the Government of India and are presently issued in three tenors: 91 day, 182 day, and 364 day.
72. Commercial Paper (CP), an unsecured money market instrument, can be issued in denominations of:
Correct Answer: b) Rs. 5 Lakhs and multiples thereof
Explanation:
Commercial Paper can be issued in denominations of Rs. 5 lakh or multiples thereof to raise short-term funds.
73. Which entities are authorized to issue a Certificate of Deposit (CD)?
Correct Answer: c) Scheduled Commercial Banks and select Financial Institutions
Explanation:
CDs are negotiable money market instruments issued in demat form or as a Usance Promissory Note by commercial banks and select all-India Financial Institutions.
74. Which of the following describes Foreign Direct Investment (FDI) as opposed to Foreign Portfolio Investment (FPI)?
Correct Answer: b) Investment intended to establish a lasting interest and control in a domestic enterprise
Explanation:
FDI involves an investor establishing a lasting interest and a significant degree of influence over the management of an enterprise in another country, unlike FPI which is passive.
75. In which year was the Securities and Exchange Board of India (SEBI) established as a statutory body?
Correct Answer: b) 1992
Explanation:
SEBI was initially formed in 1988 as a non-statutory body but was given statutory powers on April 12, 1992, through the SEBI Act, 1992.
76. What is the primary purpose of a Demat (Dematerialized) account?
Correct Answer: c) To hold shares and securities in electronic format
Explanation:
A Demat account holds financial securities like equity shares, bonds, and mutual funds in electronic form, eliminating the risks associated with physical certificates.
77. In the context of IPO applications, what does ASBA stand for?
Correct Answer: a) Applications Supported by Blocked Amount
Explanation:
ASBA is a process developed by SEBI for applying for IPOs where the application money remains in the applicant's bank account but is temporarily blocked until shares are allotted.
78. In financial markets, what does the term 'Bear Market' indicate?
Correct Answer: c) A prolonged period in which investment prices fall, accompanied by widespread pessimism
Explanation:
A bear market is a condition where securities prices fall 20% or more from recent highs amid widespread pessimism and negative investor sentiment.
79. In financial markets, what does the term 'Bull Market' indicate?
Correct Answer: b) A financial market in which prices are rising or are expected to rise
Explanation:
A bull market refers to a market condition where prices are rising or are expected to rise, reflecting investor optimism and confidence.
80. Who issues Sovereign Gold Bonds (SGBs) in India?
Correct Answer: b) Reserve Bank of India on behalf of the Government of India
Explanation:
Sovereign Gold Bonds are government securities denominated in grams of gold. They are issued by the RBI on behalf of the Government of India as an alternative to holding physical gold.
81. The Basel III norms primarily focus on improving the banking sector's ability to handle shocks arising from financial stress by improving:
Correct Answer: b) Capital adequacy, stress testing, and market liquidity risk
Explanation:
Basel III is an internationally agreed set of measures developed by the Basel Committee on Banking Supervision to strengthen the regulation, supervision, and risk management of banks.
82. How is the Capital Adequacy Ratio (CAR) or CRAR calculated?
Correct Answer: b) Tier 1 + Tier 2 Capital / Risk-Weighted Assets
Explanation:
CAR is the ratio of a bank's capital to its risk. It is calculated by dividing a bank's Tier 1 and Tier 2 capital by its Risk-Weighted Assets (RWA).
83. What constitutes 'Tier 1 Capital' in banking regulations?
Correct Answer: b) A bank's core capital, including equity capital and disclosed reserves
Explanation:
Tier 1 capital is the primary funding source of the bank, consisting of equity capital and disclosed reserves, and acts as a cushion to absorb losses without ceasing operations.
84. What is 'Tier 2 Capital'?
Correct Answer: b) Supplementary capital, including undisclosed reserves, revaluation reserves, and subordinated debt
Explanation:
Tier 2 capital is considered less reliable than Tier 1 capital because it is more difficult to accurately calculate and liquidate.
85. Under the RBI's Prompt Corrective Action (PCA) framework, which key indicators are monitored?
Correct Answer: b) Capital to Risk-Weighted Assets Ratio (CRAR), Net NPA, and Return on Assets (RoA)
Explanation:
The PCA framework relies on tracking key financial health metrics like capital adequacy, asset quality (Net NPA), and profitability (RoA) to intervene early when a bank struggles.
86. Which of the following banks are classified as Domestic Systemically Important Banks (D-SIBs) in India?
Correct Answer: b) SBI, HDFC Bank, ICICI Bank
Explanation:
The RBI has designated SBI, ICICI Bank, and HDFC Bank as D-SIBs (banks that are 'too big to fail').
87. What does KYC stand for in banking?
Correct Answer: b) Know Your Customer
Explanation:
KYC stands for Know Your Customer, a mandatory process of identifying and verifying the identity of clients to prevent fraud and money laundering.
88. What is the full form of AML in the financial sector?
Correct Answer: b) Anti-Money Laundering
Explanation:
AML stands for Anti-Money Laundering, which refers to the laws and regulations aimed at preventing criminals from disguising illegally obtained funds.
89. Where are the headquarters of the Financial Action Task Force (FATF) located?
Correct Answer: c) Paris, France
Explanation:
The FATF is an intergovernmental organization founded in 1989 to combat money laundering and terrorism financing, headquartered in Paris, France.
90. What does the CAMELS rating system evaluate?
Correct Answer: b) The overall financial condition and supervisory rating of banks
Explanation:
CAMELS evaluates Capital adequacy, Asset quality, Management, Earnings, Liquidity, and Sensitivity to market risk to gauge a bank's health.
91. Under the RBI Integrated Ombudsman Scheme, what is the maximum compensation a complainant can be awarded for consequential loss (other than harassment and mental anguish)?
Correct Answer: b) Rs. 20 Lakhs
Explanation:
The Ombudsman can award compensation up to the actual loss suffered or Rs. 20 Lakhs, whichever is lower. An additional Rs. 1 Lakh can be awarded for harassment/mental anguish.
92. In which year did the RBI launch the Integrated Ombudsman Scheme, consolidating multiple existing ombudsman schemes into one?
Correct Answer: c) 2021
Explanation:
The Reserve Bank - Integrated Ombudsman Scheme (RB-IOS) was launched in November 2021 to provide a 'One Nation One Ombudsman' approach for grievance redressal.
93. In international banking, what does a 'Loro Account' refer to?
Correct Answer: c) Their account with them (Third-party account)
Explanation:
Loro translates to 'Theirs' in Italian. It is used when a bank refers to an account held by a second bank with a third bank.
94. What is the meaning of a 'Nostro Account'?
Correct Answer: a) Our account with you (in foreign currency)
Explanation:
Nostro translates to 'Ours'. It refers to an account that a domestic bank holds in a foreign bank in the currency of the foreign country.
95. What is the meaning of a 'Vostro Account'?
Correct Answer: b) Your account with us (in domestic currency)
Explanation:
Vostro translates to 'Yours'. It refers to an account a foreign bank holds with a domestic bank in domestic currency.
96. What is an Escrow Account?
Correct Answer: b) A temporary pass-through account held by a trusted third party pending completion of a transaction
Explanation:
An escrow account is a temporary arrangement wherein a third party holds funds on behalf of two other parties involved in a transaction until conditions are met.
97. What does the term 'Bancassurance' mean?
Correct Answer: b) An arrangement where banks sell insurance products of insurance companies to their client base
Explanation:
Bancassurance is a partnership between a bank and an insurance company that allows the insurance company to sell its products to the bank's customers.
98. Why is a high CASA (Current Account Savings Account) ratio favorable for a bank?
Correct Answer: b) It provides a cheaper source of funds, improving the bank's net interest margin
Explanation:
CASA deposits carry a very low or zero interest rate. A higher CASA ratio means a lower cost of funds, which directly increases the bank's profitability.
99. What does 'Sovereign Risk' refer to in the context of international finance?
Correct Answer: b) The risk of a government defaulting on its debt or refusing to comply with loan agreements
Explanation:
Sovereign risk is the risk that a foreign central bank or government will alter its regulations, default on its debt, or fail to meet its financial obligations.
100. Who owns the currency chests established in various bank branches across India?
Correct Answer: b) The Reserve Bank of India (RBI)
Explanation:
Currency chests are storehouses where banknotes and rupee coins are stocked on behalf of the RBI. The money kept in the currency chests belongs to the RBI.
