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BRBL MODULE - A
Top MCQs
What we will study?
*High priority MCQs of Module A?
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Q1. According to the Reserve Bank of India Act of 1934, in Central Board of
Directors of RBI, how many directors are appointed by the Central
Government?
a) Four. b) Eight.
c) Ten. d) Six.
Answer: A
Refer Page: 8, Topic: 1.4.
Explanation: The general superintendence and direction of the affairs and
business of the bank have been vested with the Central Board of Directors,
which consists of: -
A governor and not more than four deputy governors appointed by the
central government.
Four directors nominated by the central government, one from each of
the local boards.
Ten directors nominated by the central government.
Two government officials nominated by the central government.
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Q2. Which of the following does not fall under the responsibilities of the
RBI?
a) Regulating the issue of Bank Notes.
b) Making the Annual Financial Statement for the Government of India.
c) Keeping of reserve for ensuring monetary Stability.
d) To operate the Currency and credit system of the Country to its
Advantage.
Answer: B
Refer Page: 10, Topic: 1.6.
Explanation: The Reserve Bank was constituted under Section 3 of the
Reserve Bank of India Act, 1934 for taking over the management of
currency from the Central Government and carrying on the business of
banking in accordance with the provisions of the Act.
Originally, under the RBI Act, the Bank had the responsibility of:
1. Regulating the issue of bank notes.
2. Keeping of reserves for ensuring monetary stability.
3. Generally, to operate the currency and credit system of the country to its
advantage.
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Q3. Appeal Against removal of Managerial Personnel of a Bank exercised by
RBI, Under Section ____ and ____ of the Banking Regulation Act 1949?
a) 10B , 36AA. b) 10A , 36BB.
c) 12B , 42AA. d) 12A , 42AA.
Answer: A
Refer Page: 11, Topic: 1.7.
Explanation: Appeal against removal of managerial personnel of a Bank
exercised by RBI, under Section 10B and 36AAof the Banking Regulation
Act.
Q4. Identify the erroneous statement concerning the constitution of banks?
a) Banks are companies registered under the companies Act, 1956
(Companies Act 2013).
b) The state of India was Constituted Under SBI ACT, 1921.
c) SBI associate/Subsidiary banks was constituted under the SBI (Subsidiary
Bank ) Act, 1959.
d) RRBs Constituted Under RRB Act 1976.
Answer: B
Refer Page: 6, Topic: 1.3.
Explanation: Constitution Of Banks:
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1. Banks in India fall under one of the following categories:
a) Body corporate constituted under a special statute.
b) Company registered under the Companies Act, 1956 (Companies Act
2013) or a foreign company.
c) Co-operative society registered under a Central or State enactment.
2. Public Sector Banks (other than SBI):
These Public Sector Banks are constituted under the Banking Companies
(Acquisition) and Transfer of Undertakings) Act, 1970 and the Banking
Companies (Acquisition and Transfer of Undertakings) Act, 1980.
3. State Bank of India (SBI):
The State Bank of India was constituted under the State Bank of India Act,
1955 while the seven associate/subsidiary banks were constituted under
the State Bank (Subsidiary Banks) Act, 1959.
4. Regional Rural Banks (RRBs):
The RRBs were constituted under the Regional Rural Banks Act, 1976.
These banks are governed by the statutes creating them as also some of
the provisions of the Banking Regulation Act and the Reserve Bank of India
Act.
5. Private Sector Banks/Foreign Banks:
Most Private Sector Banks (including Micro and Small Finance Banks) are
Companies' constituted under Section 3 of the Companies Act, 1956 or
incorporated under the Companies Act, 2013.
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6. Co-operative Banks:
A co-operative bank conducts ordinary banking business but is established
on a co-operative basis.
The history of Indian cooperative banking dates back to the enactment of
the Co-operative Societies Act in 1904.
Q5. Which Act empowers the RBI to restructure co-operative banks?
a) Reserve Bank of India Act, 1934.
b) Banking Laws ( Application to Co-operative Societies) Act, 1965.
c) The Banking Regulation (Amendment) Act 2020.
d) Co-operative Banks (Nomination) Rules, 1985.
Answer: C
Refer Page: 12, Topic: 1.8.
Explanation: The Banking Regulation (Amendment) Act 2020 was enacted
with effect from 26th June 2020 to give more powers to the RBI to
restructure Co-operative Banks, provide more control over management
through powers of Supersession of Board of directors of a Cooperative
Bank (Section 36AAA as amended) etc. and allow RBI to frame the revival
plan for these Banks and protect the interests of the depositors.
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Q6. Which of the following statements Regarding the NPA classification for
NBFCs is not correct?
a) The extant NPA classification norm is changed to an overdue period of
more than 90 days for all categories of NBFCs.
b) A glide path is provided to NBFCs in Base Layer to adhere to the 90 DAYS
NPA norm, with milestones of > 150 days overdue by March 31, 2024, > 120
days overdue by March 31,2025, and > 90 days overdue by March 31, 2026.
c) The Glide Path is not applicable for NBFCs already following the 90-days
norm.
d) The Deadline for achieving > 90 days overdue under the new norm is
March 31, 2025.
Answer: D
Refer Page: 114, Topic: 6.6.
Explanation: NPA Classification: The extant NPA classification norm stands
changed to the overdue period of more than 90 days for all categories of
NBFCs.
A glide path (not applicable for those NBFCs that are already following the
90 day norm) is provided to NBFCs in Base Layer to adhere to the 90 days
NPA norm as under.
NPA Norms Timeline
>150 days overdue. By March 31,2024.
>120 days overdue. By March 31, 2025.
> 90 days. By March 31, 2026.
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Q7. Which of the following is not a correct provision rate according to the
RBI’s guidelines effective from October 1, 2022, for NBFCs classified as
NBFC-UL?
a) 0.25 % For individual housing loan and loans to small and Micro
Enterprises (SMEs).
b) 2.00 % For Housing loans extended at teaser rates.
c) 0.75 % For Advances to Commercial Real Estate - Residential Housing
(CRE-RH) Sector.
d) 1.50% For Advances to Commercial Real Estate (CRE) Sector (Other than
CRE - RH).
Answer: D
Refer Page: 114, Topic: 6.6.
Explanation: Provisioning for Standard assets: The RBI has w. e. f. 01-10
2022 decided that NBFCs classified as NBFC-UL shall maintain provisions in
respect of 'standard' assets at the following rates for the funded amount
outstanding:
Category of Assets Rate of Provision
Individual housing loans and loans 0.25 per cent.
to Small and 0.25 per cent Micro
Enterprises (SMEs).
Housing loans extended at teaser 2.00 per cent, which will decrease to 0.40
rates. per cent after 1 year from the date on
which the rates are reset at higher rates (if
the accounts remain 'standard').
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Advances to Commercial Real Estate 0.75 per cent.
Residential Housing (CRE - RH)
Sector.
Advances to Commercial Real Estate 1.00 per cent.
(CRE) Sector (other than CRE-RH).
Restructured advances. As stipulated in the applicable prudential
norms for restructuring of advances.
All other loans and advances not 0.40 per cent.
included above, including loans to
Medium Enterprises.
Q8. What is the Minimum Initial Contribution required from the promoter
to the paid -up equity capital of a Payment Bank for the First Five Years
from the Commencement of its Business?
a) 40%. b) 20%.
c) 30%. d) 50%.
Answer: A
Refer Page: 101, Topic: 5.9.
Explanation: Payments Banks:
1. Capital requirement:
The minimum paid-up equity capital for payments banks shall be Rs. 100
crore.
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The payments bank should have a leverage ratio of not less than 3 per cent,
i.e., its outside liabilities should not exceed 33.33 times its net worth (paid-
up capital and reserves).
2. Promoter's contribution: The promoter's minimum initial contribution to
the paid-up equity capital of such payments bank shall be at least 40 per
cent for the first five years from the commencement of its business.
Q9. According to the Provided Statement:
What is the requirement for the NBFCs with 10 or more branches regarding
Core Banking Solution (CBS)?
a) They must adopt CBS with Immediate effect from October 01, 2022.
b) Adoption of CBS is not mandatory for NBFCs with 10 or more branches.
c) A glide Path of 3 years with effect from October 01, 2022 is being
provided.
d) CBS adoption is only recommended but not mandated for such NBFCs.
Answer: C
Refer Page: 118, Topic: 6.9.
Explanation: Core Banking Solution - NBFCs with 10 and more branches are
mandated to adopt Core Banking Solution.
A glide path of 3 years with effect from October 01, 2022 is being provided.
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Q10. What is the Minimum Set-up Capital required for a Local Area Bank?
a) 2 Crore. b) 5 Crore.
c) 10 Crore. d) 15 Crore.
Answer: B
Refer Page: 103, Topic: 5.10.
Explanation: LOCAL AREA BANKS (LAB):
It was in 1996 that a decision was taken to allow the establishment of Local
Area Banks in the private sector.
These banks were expected to bridge the gaps in credit availability and
enhance the institutional credit framework in the rural and semi-urban
areas and provide efficient and competitive financial intermediation
services in their area of operation.
It was expected that the minimum start-up capital of a LAB would be Rs. 5
crore with the promoters bringing in the entire minimum share capital up-
front.
Q11. Which of the Following is not correct with regard to On- tap Licensing
Policy for Small Finance Banks (SFB)?
a) SFBs will be given scheduled bank status immediately upon
commencement of operation.
b) Payments bank can apply for Conversion into SFB after 3 Years of
operation.
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c) Primary Urban Cooperative Bank desirous of voluntarily transiting to SFB
requires initial net worth of Rs. 100 Crore.
d) Minimum Paid up Equity capital shall be Rs. 200 crore.
Answer: B
Refer Page: 103, Topic: 5.9.
Explanation: On-Tap Licensing Policy of the RBI for SFBs:
RBI vide Press Release dated 5th December 2019, released the Guidelines
for 'on tap' Licensing of Small Finance Banks in the Private Sector'.
The Major changes from the earlier Guidelines on Small Finance Banks
dated November 27, 2014, are as follows:
1. The licensing window will be open on-tap.
2. Minimum paid-up voting equity capital / net worth requirement shall be
Rs. 200 crore.
3. For Primary (Urban) Co-operative Banks (UCBs), desirous of voluntarily
transiting into Small Finance Banks (SFBs) initial requirement of net worth
shall be at Rs. 100 crore, which will have to be increased to Rs. 200 crore
within five years from the date of commencement of business.
Incidentally, the net-worth of all SFBs currently in operation is in excess of
Rs. 200 crore.
4. SFBs will be given scheduled bank status immediately upon
commencement of operations.
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5. SFBs will have general permission to open banking outlets from the date
of commencement of operations.
6. Payments Banks can apply for conversion into SFB after five years of
operations, if they are otherwise eligible as per these guidelines.
Q12. What are the Primary objectives of the integrated Ombudsman
Scheme 2021 announced By RBI?
a) To impose penalties on entities regulated by RBI.
b) To Exclude Non- schedules Primary Co-operative Banks from the
ombudsman mechanism.
c) To establish a new regulatory framework for digital Transactions.
d) To provide cost-free redress of customer complaints related to deficient
services by regulated entities.
Answer: D
Refer Page: 52, Topic: 3.10.
Explanation: RBI has announced revised guidelines in respect of the
Integrated Ombudsman Scheme 2021 as follows:
1. The Scheme integrates the existing three Ombudsman schemes of RBI
namely.
i) the Banking Ombudsman Scheme, 2006.
ii) the Ombudsman Scheme for Non-Banking Financial Companies, 2018.
iii) the Ombudsman Scheme for Digital Transactions, 2019.
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The Scheme, framed by the Reserve Bank in exercise of the powers
conferred on it under Section 35A of the Banking Regulation Act, 1949 (10
of 1949), Section 45L of the Reserve Bank of India Act, 1934 (2 of 1934), and
Section 18 of the Payment and Settlement Systems Act, 2007 (51 of 2007),
is focused to provide cost-free redress of customer complaints involving
deficiency in services rendered by entities regulated by RBI, if not resolved
to the satisfaction of the customers or not replied within a period of 30
days by the regulated entity.
Q13. Under the Integrated Ombudsman Scheme 2021, what is the role of
the centralized Receipt and processing center set up at RBI, Chandigarh?
a) It processes physical and email complaints in any language.
b) It represents regulated entities during the complaint resolution process.
c) It is responsible for issuing awards against regulated entities.
d) It handles appeals related to ombudsman decisions.
Answer: A
Refer Page: 52, Topic: 3.10.
Explanation: Some of the salient features of the Integrated Ombudsman
Scheme 2021 are:
1. It will no longer be necessary for a complainant to identify under which
scheme he/she should file complaint with the Ombudsman.
2. The Scheme defines 'deficiency in service' as the ground for filing a
complaint, with a specified list of exclusions.
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Therefore, the complaints would no longer be rejected simply on account
of "not covered under the grounds listed in the scheme".
3. The Scheme has done away with the jurisdiction of each ombudsman
office.
4. A Centralized Receipt and Processing Centre has been set up at RBI,
Chandigarh for receipt and initial processing of physical and email
complaints in any language.
5. The responsibility of representing the Regulated Entity and furnishing
information in respect of complaints filed by customers against the
Regulated Entity would be that of the Principal Nodal Officer in the rank of
a General Manager in a Public Sector Bank or equivalent.
6. The Regulated Entity will not have the right to appeal in cases where an
Award is issued by the ombudsman against it for not furnishing satisfactory
and timely information/documents.
Q14. What was the Primary Focus of the Advisory group chaired by Dr. R.H.
Patil in March 2001?
a) Examination of issues related to Public Sector Banks.
b) Consideration of Government Policies in June 2002.
c) Evaluation of Corporate Governance in Indian banks.
d) Submission of a report on corporate governance in June 2002.
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Answer: C
Refer Page: 31, Topic: 2.11.
Explanation: Reserve Bank's approach: Following the formal policy
announcement in regard to corporate governance, in the mid-term review
of the Monetary and Credit Policy in October, 2001, the Reserve bank
constituted a Consultative Group in November, 2001 under the
chairmanship of Dr. A.S. Ganguly with a view to strengthen the internal
supervisory role of the boards of banks.
The report of the group was transmitted to all the banks for their
consideration in June, 2002 and simultaneously to the Government of India
for consideration.
Earlier, an advisory group on corporate governance under the chairmanship
of Dr. R.H. Patil had submitted its report in March, 2001 which examined
the issues relating to corporate governance in banks in India, including the
public sector banks and made recommendations to bring the governance
standards in India on par with the best international standards.
Q15. What is the minimum Denomination for a Commercial paper (CP)?
a) Rs. 1 Lakh. b) Rs. 5 Lakh.
c) Rs. 2 Lakh. d) Rs. 10 Lakh.
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Answer: B
Refer Page: 50, Topic: 3.9.
Explanation: In the primary market, CDs shall be issued only in
dematerialized form and held with a depository registered with Securities
and Exchange Board of India with a minimum denomination of Rs. 5 lakh
and in multiples of Rs. 5 lakh thereafter.
Q16. The First Narasimhan Committees set up by the Government of India
in 1991 was also known as _______?
a) Committee on the Financial System.
b) Committee on Banking Sector Reforms.
c) Committee on Enhance Supervisory Measures.
d) Committee on IRAC Norms.
Answer: A
Refer Page: 124, Topic: 7.2.
Explanation: Narasimham Committee 1 (1991):
Background: The Committee was set up in August 1991, to examine all
aspects relating to the 'Structure, Organization Functions and Procedures'
of the financial system.
It was also called the 'Committee on Financial Systems'.
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The setting up of the Committee presented, the first systematic attempt by
the Government of India at reforming the financial system- mainly the
banking system.
The Committee submitted its report in November, 1991.
Q17. What is the maximum Imprisonment period for making the False
Statement under the Reserve Bank of India Act?
a) 1 Year. b) 2 Years.
c) 3 Years. d) 5 Years.
Answer: C
Refer Page: 79, Topic: 4.11.
Explanation: Penalties under the RBI Act: Chapter V of the Reserve Bank of
India Act deals with penalty for violation of the Act.
Banking companies have to make applications and furnish returns,
statements, etc., under different provision of the Act, regulations, orders,
directions, etc.
While doing so, the making of any statement which is false in any particular
material, knowing it to be false or willfully omitting to make any material
statement, is punishable with imprisonment up to a period of three years
and also a fine.
Failure to produce any books, accounts or other documents or statements,
or information which a person is duty bound to make under the Act, or any
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order, regulation or direction is punishable with fine up to Rs. 100,000 for
each offence.
Q18. What is the Primary Function of the Financial Sector Development
Council (FSDC)?
a) Enhancing Financial Literacy and Financial Inclusion.
b) Monitoring Macro- Prudential Supervision.
c) Maintaining Financial Stability and Development.
d) Coordinating Inter - Regulatory Forums.
Answer: C
Refer Page: 133, Topic: 7.8.
Explanation: Function Of The FSDC:
The functions of FSDC include:
1. To strengthen and institutionalize the mechanism for maintaining
financial stability and development.
2. Monitoring of macro-prudential supervision of the economy including
the functions of large financial conglomerates.
3. To enhance inter-regulatory coordination.
4. Focus on financial literacy and financial inclusion.
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Q19. According to the RBI circular dated August 8, 2022, what conditions
must a Category – II, Small Finance Bank (SFB) fulfill to operate as an AD
Category - I?
a) Minimum Net Worth of Rs. 100 Crore and CRAR of 10%.
b) Minimum Net Worth of Rs. 500 Crore and CRAR of 15%.
c) Minimum Net Worth of Rs. 300 Crore and CRAR of 5%.
d) Minimum Net Worth of Rs. 700 Crore and CRAR of 20%.
Answer: B
Refer Page: 103, Topic: 5.9.
Explanation: RBI vide circular dated 8th August 2022 has permitted the
Category-II SFBs to act as AD Category-I subject to conditions that a bank
should have completed at least two years of operations as Authorized
Dealer Category-II and should have been included in the Second Schedule
to RBI Act 1934, It should have a minimum net worth of Rs. 500 crore and
its CRAR should not be less than 15%.
Q20. According to section 24(3) of the Banking Regulation Act, when is a
Banking Company required to submit a return of its liquid assets to the
Reserve Bank of India?
a) Within Ten Days From the End of the Month.
b) Within Fifteen Days From the End of the Month.
c) Within Twenty - five Days From the End of the Month.
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d) Within Twenty Days From the End of the Month.
Answer: D
Refer Page: 67, Topic: 4.4.
Explanation: Return on Liquid Assets: Every banking company has to submit
a return of its liquid assets under Section 24(3) of the Banking Regulation
Act.
The return has to be submitted within twenty days from the end of the
month to which it relates.
The return has to be in the form prescribed under Rule 13A of the Banking
Regulation (Companies) Rules, 1949.
The return should contain particulars of assets and the demand and time
liabilities, as at the close of business of each alternate Friday or when such
a Friday is a holiday, as at the close of business of the preceding working
day.
Q21. Under which section of Banking Regulation Act, A Banking company
may be amalgamated with another banking company?
a) Section 45B. b) Section 44A.
c) Section 43B. d) Section 42A.
Answer: B
Refer Page: 74, Topic: 4.9.
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Explanation: Voluntary Amalgamation: A banking company may be
amalgamated with another banking company under Section 44A of the
Banking Regulation Act.
For this purpose, a scheme has to be prepared, containing the terms of
such an amalgamation in a draft and placed before the shareholders of the
two companies separately.
The scheme has to be approved by a resolution passed by majority of
members representing two-thirds in value of the shareholders of each
company present in person or by proxy.
Q22. What qualifications are required to become the full-time Chairman
and Managing Director of a banking company?
i) The Working of a Banking Company, or of the State Bank of India or any
Subsidiary bank or a Financial Institution.
ii) A member of the Board of Directors of the Regional Rural Bank.
iii) Special Knowledge in the Field of Financial, Economic or Business
administration.
iv) Must have Working experience in the Banking sector for a period of
Over 25 Years.
a) Only (i) and (iv). b) (i), (ii) and (iii).
c) (ii), (iii) and (iv). d) Only (i) and (iii).
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Answer: D
Refer Page: 26, Topic: 2.7.
Explanation: Qualifications of whole-time Chairman/Managing Director:
According to Section 10 B (4) of the BR Act "Every Chairman who is
appointed on whole-time basis and every Managing Director of a banking
company appointed under sub-section (1A)] shall be person who has
special knowledge and practical experience of -
1. The working of a banking company, or of the State Bank of India or any
subsidiary bank or a financial institution.
2. Financial, economic or business administration.
Case Study. (Q23 to 27).
BB Bank, a Small Finance Bank is in need of short term funds and wants to
borrow from the Money Markets'. Answer the following questions on the
rules it will have to follow and the instruments it may use to borrow.
Q23. Which one of the following is not a Money Market instrument
through which BB Bank may borrow funds?
a) Issue of Certificate of Deposit.
b) Interbank Call Money.
c) Interbank Notice Моnеу.
d) Issue of Non- Convertible Debentures.
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Answer: D
Refer Page: 49, Topic: 3.9.
Explanation: Issue of Certificate of Deposit, Interbank Call Money and
Interbank Notice Моnеу all are part of Money Market Instruments.
Q24. Under the Sale of Goods Act, there is an ______ that the buyer shall
have and enjoy quiet possession?
a) Implied Warranty. b) Implied Guarantee.
c) Implied State. d) Implied Condition.
Answer: A
Refer Page: 49, Topic: 3.9.
Explanation: Under the Sale of Goods Act, there is an implied warranty that
the buyer shall have and enjoy quiet possession of the goods. This means
the buyer has the right to use the goods without interference from anyone,
including someone claiming a better title to the goods.
Q25. What is the prudential limit for outstanding borrowing in the Call and
Notice Money Markets that BB Bank may have at the end of any given day?
a) 125% of Total Capital Funds. b) 100% of Tier 1 Capital Funds.
c) 125% of Tier 1 Capital Funds. d) 100% of Total Capital Funds.
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Answer: A
Refer Page: 49, Topic: 3.9.
Explanation:
Participant Category Prudential Limit
Scheduled Commercial Call and Notice Money:
Banks Internal board approved limits within the prudential limits
for inter-bank liabilities prescribed by Department of
Regulation.
Term Money:
Internal board approved limit within the prudential limits
for inter-bank liabilities.
Small Finance Banks Call and Notice Money:
i) 100% of capital funds, on a daily average basis in a
reporting fortnight, and
ii) 125% of capital funds on any given day.
Term Money:
Internal board approved limit within the prudential limits
for inter-bank liabilities.
Q26. What is the prudential limit for outstanding borrowing in the Call and
Notice Money Markets that BB Bank may have on a daily average basis in a
reporting fortnight?
a) 75% of Tier 1 Capital Funds. b) 100% of Tier 1 Capital Funds.
c) 125% of Total Capital Funds. d) 100% of Total Capital Funds.
Answer: D
Refer Page: 50, Topic: 3.9.
Explanation:
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Participant Category Prudential Limit
Scheduled Commercial Call and Notice Money:
Banks Internal board approved limits within the prudential limits
for inter-bank liabilities prescribed by Department of
Regulation.
Term Money:
Internal board approved limit within the prudential limits
for inter-bank liabilities.
Small Finance Banks Call and Notice Money:
i) 100% of capital funds, on a daily average basis in a
reporting fortnight, and
ii) 125% of capital funds on any given day.
Term Money:
Internal board approved limit within the prudential limits
for inter-bank liabilities.
Q27. Which of the following is correct as regards Commercial Paper as a
money market instrument?
i) Minimum denomination of the instrument should be INR 5 lakh.
ii) They are issued at a discount to its face value.
iii) They are held in dematerialized form.
a) Only (i) and (ii). b) Only (ii) and (iii).
c) Only (i) and (iii). d) All (i), (i) and (iii).
Answer: D
Refer Page: 51, Topic: 3.9.
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Explanation: All residents, and non-residents permitted to invest in CPs
under Foreign Exchange Management Act (FEMA), 1999 are eligible to
invest in CPs; however, no person can invest in CPs issued by related
parties either in the primary or secondary market.
Other Conditions:
A CP shall be issued in the form of a promissory note at a discount to face
value and held in a dematerialized form through any of the depositories
approved by and registered with SEBI.
Minimum denomination of CP shall be Rs. 5 lakh and multiples thereof.
No issuer shall have the issue of a CP underwritten or co-accepted.
Options (call/put) are not permitted on a CP.
Eligible issuers, whose total CP issuance during a calendar year is Rs. 1000
crore or more, shall obtain credit rating for issuance of CPs from at least
two CRAS registered with SEBI and should adopt the lower of the two
ratings.
Where both ratings are the same, the issuance shall be for the lower of the
two amounts for which ratings are obtained.
The minimum credit rating for a CP shall be 'A3' as per rating symbol and
definition prescribed by SEBI.
The buyback offer can be made at prevailing price and the same may not
be made before 30 days from the date of issue.
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Q28. The Marginal Cost of Fund Based Lending Rate (MCLR) does not
include which of the following?
a) Marginal Cost of Funds.
b) Positive Carry on account of CRR.
c) Operating Costs.
d) Tenor Premium.
Answer: B
Refer Page: 44, Topic: 3.6.
Explanation: The MCLR shall comprise of:
1. Marginal Cost of funds:
The marginal cost of funds shall comprise of Marginal cost of borrowings
and return on net worth.
The detailed methodology for computing marginal cost of funds is given in
the RBI website.
2. Negative Carry on account of CRR:
Negative carry on the mandatory CRR which arises due to return on CRR
balances being nil, will be calculated as under:
Required CRR x (marginal cost)/ (1- CRR)
The marginal cost of funds arrived at (iii) above shall be used for arriving at
negative carry on CRR.
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3. Operating Costs:
All operating costs associated with providing the loan product including
cost of raising funds shall be included under this head.
It shall be ensured that the costs of providing those services which are
separately recovered by way of service charges do not form part of this
component.
4. Tenor premium:
These costs arise from loan commitments with longer tenor.
The change in tenor premium should not be borrower specific or loan class
specific.
In other words, the tenor premium will be uniform for all types of loans for
a given residual tenor.
Q29. Identify the Correct Relationship between the Paid - up Capital and
Subscribed Capital?
a) Paid – up Capital shall be equal to its Subscribed Capital.
b) Paid – up Capital shall be always greater than its Subscribed Capital.
c) Paid-up capital shall not be less than half of its subscribed capital.
d) paid-up capital shall not be less than one- fourth of its subscribed capital.
Answer: C
Refer Page: 22, Topic: 2.3.
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Explanation: Paid-up Capital, Subscribed Capital and Authorized Capital:
Apart from the above, Section 12(1) of the Banking Regulation Act
stipulates that the subscribed capital of a banking company shall not be
less than half of its authorized capital, and the paid-up capital shall not be
less than half of its subscribed capital.
If capital is increased, this requirement has to be complied within a period
not exceeding two years as allowed by the Reserve Bank.
In terms of Section 12 (1) (i) (ii) of the Banking Regulation Act, Banking
Companies are permitted to issue equity shares or equity shares and
preference shares (whether perpetual or irredeemable or redeemable).
Q30. A Director of a Banking Company may serve in their position for a
maximum duration of?
a) Five Years Continuously. b) Ten Years Continuously.
c) Twelve Years Continuously. d) Eight Years Continuously.
Answer: D
Refer Page: 25, Topic: 2.6.
Explanation: Period of office: The directors of a banking company shall not
hold office for more than eight years continuously. However, this provision
is not applicable to the chairman or a whole-time director.
When the chairman or a whole-time director of a bank is removed from
office, he/she ceases to be a director of the bank and shall not be eligible
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for further appointment as director of that banking company for a period of
four years.
Q31. Which section of the RBI Act stipulates the requirement for Scheduled
Banks to maintain a cash reserve (CRR)?
a) Section 18. b) Section 28.
c) Section 40. d) Section 42.
Answer: D
Refer Page: 56, Topic: 3.11.2.
Explanation: Every banking company which is a scheduled bank has a duty
to maintain certain cash reserve with the Reserve Bank under Section 42 of
the Reserve Bank of India Act.
In the case of non-scheduled banks, Section 18 of the Banking Regulation
Act provides for the maintenance of cash reserve.
Q32. DAKSH is related to?
a) SEBI Advance Supervisory Monitoring System.
b) Reserve Bank’s Advanced Supervisory Monitoring System.
c) Technical Assistance Program for Cooperative Banks.
d) Prompt Corrective Action Frame work for weak Banks.
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Answer: B
Refer Page: 73, Topic: 4.7.
Explanation: Daksh: Reserve Bank's Advanced Supervisory Monitoring
System Vide its Press Release dated 06-10-2022, RBI announced launch of a
new initiative named DAKSH.
This is a web-based end-to-end workflow application through which RBI
shall monitor compliance requirements in a more focused manner with the
objective of further improving the compliance culture in Supervised Entities
(SES) like Banks, NBFCs, etc.
Q33. What is the Minimum Paid – up Capital for Payment Banks?
a) 200 Crore. b) 500 Crore.
c) 100 Crore. d) 250 Crore.
Answer: C
Refer Page: 101, Topic: 5.9.
Explanation: Payments Banks:
i) Eligible promoters:
(a) Existing non-bank Pre-paid Payment Instrument (PPI) issuers, and other
entities such as individuals/ professionals; Non-Banking Finance Companies
(NBFCs), corporate Business Correspondents (BCS), mobile telephone
companies, super-market chains, companies, real sector cooperatives; that
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are owned and controlled by residents; and public sector entities may apply
to set up payments banks.
(b) A promoter/promoter group can have a joint venture with an existing
scheduled commercial bank to set up a payments bank. However,
scheduled commercial bank can take equity stake in a payments bank to
the extent permitted under Section 19 (2) of the Banking Regulation Act,
1949.
ii) Scope of activities:
(a) Acceptance of demand deposits.
Payments bank were initially restricted to holding a maximum balance of
Rs. 100,000 per individual customer.
However, this maximum balance holding limit per individual customer at
the end of the day has undergone revision to Rs. 200000/- (Rupees Two
Lakh only) vide RBI notification dated 8th April 2021.
(b) Issuance of ATM/debit cards. Payments banks, however, cannot issue
credit cards.
(c) Payments and remittance services through various channels.
(d) Banking Correspondent (BC) of another bank, subject to the Reserve
Bank guidelines on BCs.
(e) Distribution of non-risk sharing simple financial products like mutual
fund units and insurance products, etc.
iii) Deployment of funds:
The payments bank cannot undertake lending activities.
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Apart from amounts maintained as Cash Reserve Ratio (CRR) with the
Reserve Bank on its outside demand and time liabilities, it will be required
to invest minimum 75 per cent of its “demand deposit balances" in
Statutory Liquidity Ratio (SLR) eligible Government securities/treasury bills
with maturity up to one year and hold maximum 25 per cent in current and
time/fixed deposits with other scheduled commercial banks for operational
purposes and liquidity management.
iv) Capital requirement:
The minimum paid-up equity capital for payments banks shall be Rs. 100
crore.
The payments bank should have a leverage ratio of not less than 3 per cent,
i.e., its outside liabilities should not exceed 33.33 times its net worth (paid-
up capital and reserves).
v) Promoter's contribution: The promoter's minimum initial contribution to
the paid-up equity capital of such payments bank shall at least be 40 per
cent for the first five years from the commencement of its business.
Q34. What is the Full Form of the name Given to the reform program
“EASE” introduced in January 2018?
a) Enhanced Access & Service Excellence.
b) Excellence in Activities that Serve Enterprises.
c) Enhancement in the Ability to Service Entrepreneurs.
d) None of the Above.
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Answer: A
Refer Page: 129, Topic: 7.3.
Explanation: Supervisory measures:
1. Establishment of the Board for Financial Supervision as the apex
supervisory authority for commercial banks, financial institutions and
NBFCs.
2. Introduction of CAMELS supervisory rating system, move towards risk-
based supervision, consolidated supervision of financial conglomerates,
strengthening of off-site surveillance through control returns.
3. Recasting of the role of statutory auditors, increased internal control
through strengthening of internal audit.
4. Strengthening corporate governance, enhanced due diligence on
important shareholders, fit and proper tests for directors, etc. introduced.
5. The Government of India introduced the Enhanced Access & Service
Excellence'1 (EASE) in January 2018 which represented a comprehensive
reforms agenda required to be put in place in a time bound manner by PSBs
thereby institutionalizing clean and smart banking.
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Q35. What Power does the new section 45MAA grant to the RBI concerning
auditors of RBI – regulated entities?
a) The power to appoint auditors for RBI – Regulated entities.
b) The power to suspend an Auditor for a period of 3 years.
c) The power to remove or debar an auditor for 3 years for non –
compliance with RBI Directions.
d) The Power to audit RBI – regulated entities directly.
Answer: C
Refer Page: 9, Topic: 1.4.
Explanation: The new section 45MAA introduced, gives the RBI the power
to remove or debar an auditor from exercising duties as an auditor for an
RBI regulated entity for a period of 3 years, if, the RBI is satisfied that such
auditor has failed to comply with its directions.
Further for providing resolution in NBFCs after inspecting the books of
accounts of the NBFC, the RBI may, in the public interest or in the interest
of financial stability, frame schemes to preserve the continuity of the NBFC.