Banking awareness test - Set 1

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  Explanation 

ANSWER: April 1, 1935

Explanation:
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  Explanation 

ANSWER: State Bank of India

Explanation:
No explanation is available for this question!


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  Explanation 

ANSWER: All the above

Explanation:
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)   What does 'Nomination' for a deposit account in the bank mean?

a. Mandate given by the close relatives of the depositor to settle the death claim in case of death of the depositor
b. Mandate decided by the bank to settle the death claim of its depositor
c. Mandate of the depositor in favor of one or more persons to claim the amount on death of the depositor
d. Mandate of the depositor in favor of a close relative who can claim the amount on death of the depositor
Answer  Explanation 

ANSWER: Mandate of the depositor in favor of a close relative who can claim the amount on death of the depositor

Explanation:
No explanation is available for this question!


5)   When were the draft guidelines for building grievance redressal mechanism within NBFCs (Non-Banking Financial Companies) published?

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

ANSWER: May 26, 2006

Explanation:
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.


6)    Which subsidiary bank was merged with the State Bank of India on August 13, 2008?

a. State Bank of Hyderabad
b. State Bank of Indore
c. State Bank of Mysore
d. State Bank of Saurashtra
Answer  Explanation 

ANSWER: State Bank of Saurashtra

Explanation:
State Bank of Saurashtra was a government-owned bank in India. It was one of the seven Associate Banks of the State Bank of India, with which it merged on 13 August 2008. At the time of the merger, the Bank had a network of 423 branches spread over 15 states and the Union Territory of Daman and Diu.


7)   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  Explanation 

ANSWER: June, 2008

Explanation:
NABARD, with a paid-up capital of Rs.2,000 crore, was set up as an apex development bank with the mandate of facilitating credit flow for promotion and development of agriculture, small-scale industries, cottage and village industries, handicrafts and other rural crafts. It was the Narasimhan Committee that recommended the transfer of RBI's stake in State Bank of India, Nabard and NHB to the government to differentiate the central bank's role as the owner of banks and the sector regulator.


8)   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  Explanation 

ANSWER: January, 1982

Explanation:
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.


9)   When did the National Housing Bank start its operations?

a. July, 1982
b. July, 1988
c. April, 1980
d. March, 1971
Answer  Explanation 

ANSWER: July, 1988

Explanation:
The National Housing Bank, the apex institution of housing finance in India, is a wholly-owned subsidiary of RBI. It started operating from July, 1988 with an authorised paid-up capital of RS. 450 crore.


10)   When did the Government initiate the process of amalgamation of RRBs in a phased manner?

a. September, 2005
b. March, 2009
c. June, 2009
d. March, 2010
Answer  Explanation 

ANSWER: September, 2005

Explanation:
The Government initiated the process of amalgamation of RRBs in a phased manner with a view to consolidate and strengthen RRBs. 196 RRBs were amalgamated to form 86 new RRBs till March 31, 2009.


11)   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  Explanation 

ANSWER: December, 1997

Explanation:
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.


12)   Which of the following does not belong to the main products of life insurance?

a. Endowment
b. Personal accident insurance
c. Term
d. Whole life
Answer  Explanation 

ANSWER: Personal accident insurance

Explanation:
Whole life, Endowment, Term, Investment-linked, Life annuity plan, Medical and health are the main products of life insurance. Motor insurance, Fire/House owners/Householders insurance, Personal accident insurance, Medical and health insurance, Travel insurance are the main products of general insurance.


13)   Which of the following does not belong to the major general insurance private sector companies in India?

a. Bajaj Allianz General Insurance
b. Reliance General Insurance
c. Royal Sundaram Alliance Insurance
d. The Oriental Insurace Company
Answer  Explanation 

ANSWER: The Oriental Insurace Company

Explanation:
New India Assurance Company Limited, National Insurance Company Limited, The Oriental Insurance Company, United India Insurance, Agricultural Insurance Company of India are the major general insurance companies in India. Bajaj Allianz General Insurance, ICICI Lombard General Insurance, IFFCO-Tokio General Insurance, Reliance General Insurance, Royal Sundaram Alliance Insurance, TATA AIG General Insurance, Cholamandalam General Insurance, HDFC Ergo are the major general insurance private sector companies in India.


14)   What is a Lease?

a. A rental agreement between owner of a flat/house and the Tenant, whereby the Tenant pays specified amount on specified dates to the owner
b. A legal contract between the owner of an asset and its user, containing many conditions including payment of a specified amount by the user to the Owner for use of the asset
c. Both (1) and (2)
d. None of the above
Answer  Explanation 

ANSWER: A legal contract between the owner of an asset and its user, containing many conditions including payment of a specified amount by the user to the Owner for use of the asset

Explanation:
Lease financing for equipment is provided by banks, captives and independent finance companies.


15)   Which of the following are Bank advances of a Bank?

a. Bad debts
b. Non-performing Assets
c. Out of order accounts
d. Overdrawn accounts
Answer  Explanation 

ANSWER: Non-performing Assets

Explanation:
A Non-performing Asset is defined as a credit facility in respect of which the interest has remained 'past due' for a specified period of time.


16)   Which of the following are benefited through the Reserve mortgage scheme?

a. Government employees
b. Minors
c. Senior citizens
d. All the above
Answer  Explanation 

ANSWER: Senior citizens

Explanation:
Some financial institutions that provide the scheme in India are Dewan Housing Finance, State Bank of India, Punjab National Bank, Bank of Baroda, Central Bank of India, Union Bank of India, LIC Housing Finance, Indian Bank, Andhra Bank, Corporation Bank, Canara Bank.


17)   What will be the impact if Reserve Bank of India reduces the Bank Rate by 1%?

a. Less liquidity in the market
b. More liquidity in the market
c. No change in the market liquidity
d. Mobilisation of more deposits by commercial banks
Answer  Explanation 

ANSWER: More liquidity in the market

Explanation:
Market liquidity is a market's ability to facilitate an asset being sold quickly without having to reduce its price.


18)   What is the full form of IRR?

a. Internal Rate of Return
b. Internal Reserve Ratio
c. Internal Rate of Ratio
d. Internal Recession Rate
Answer  Explanation 

ANSWER: Internal Rate of Return

Explanation:
The internal rate of return is a rate of return used in capital budgeting to measure and compare the profitability of investments.


19)   What does the letter 'M' mean in the term SME as used in the financial world?

a. Maximum
b. Medium
c. Market
d. Mutual
Answer  Explanation 

ANSWER: Medium

Explanation:
Small and medium-sized enterprises are businesses whose personnel numbers fall below certain limits.


20)   What is the full form of FIMMDA?

a. Fixed Income Money Markets & Derivatives Association
b. Foreign Income Money Markets & Derivatives Association
c. Floating Income Money Markets & Derivatives Association
d. Fixed Income Money Markets & Derivatives Affiliation
Answer  Explanation 

ANSWER: Fixed Income Money Markets & Derivatives Association

Explanation:
FIMMDA is a voluntary market body for the bond, money and derivative markets.