1. With reference to the consolidation of public sector banks in 2019-2020, consider the following statements:
1. Oriental Bank of Commerce and United Bank of India were merged with Punjab National Bank.
2. Syndicate Bank was merged with Canara Bank.
3. Andhra Bank and Corporation Bank were merged with Union Bank of India.
4. Allahabad Bank was merged with Bank of Baroda.
Which of the statements given above are correct?
✅ Correct answer: (D) PSB CONSOLIDATION. 2017: five SBI associate banks and Bharatiya Mahila Bank merged with SBI. 2019: Vijaya Bank and Dena Bank merged with Bank of Baroda. Effective 1 April 2020: Oriental Bank of Commerce + United Bank of India -> Punjab National Bank (second-largest PSB); Syndicate Bank -> Canara Bank; Andhra Bank + Corporation Bank -> Union Bank of India; Allahabad Bank -> Indian Bank (not Bank of Baroda, so statement 4 is wrong). The number of public sector banks fell from 27 (2017) to 12. Reasons: economies of scale, stronger balance sheets, global-scale lenders (recommended in the Narasimham II logic and the PJ Nayak Committee). Banks Board Bureau (2016) became the Financial Services Institutions Bureau (2022) to select heads of PSBs and financial institutions.
2. With reference to the Pradhan Mantri MUDRA Yojana, consider the following statements:
1. It was launched in April 2015.
2. Shishu loans are those up to Rs 50,000.
3. Kishor loans are those from Rs 50,000 to Rs 5 lakh.
4. MUDRA lends directly to individual borrowers at its own branches.
5. A 'Tarun Plus' category of Rs 10 lakh to Rs 20 lakh was introduced for entrepreneurs who have successfully repaid earlier Tarun loans.
Which of the statements given above are correct?
✅ Correct answer: (A) MUDRA. The Micro Units Development and Refinance Agency (MUDRA) was set up in April 2015 as a SIDBI subsidiary/NBFC-MFI and it is a REFINANCE institution: loans are given by banks, NBFCs, MFIs and SFBs (the 'Member Lending Institutions'), not by MUDRA directly, so statement 4 is wrong. Loans are collateral-free for non-farm income-generating micro/small enterprises up to Rs 10 lakh in three categories - Shishu (up to Rs 50,000), Kishor (Rs 50,000-5 lakh), Tarun (Rs 5-10 lakh) - and the Union Budget 2024-25 added Tarun Plus (Rs 10-20 lakh) for those who repaid earlier Tarun loans. MUDRA loans count under priority sector lending. Together with Stand-Up India (loan Rs 10 lakh to Rs 1 crore for SC/ST and women entrepreneurs, 2016) they target the 'unfunded' small business sector.
3. Consider the following statements about the capital market in India:
1. An Initial Public Offer takes place in the primary market, while trading of already listed shares takes place in the secondary market.
2. Offer for Sale (OFS) allows promoters of listed companies to sell shares through a stock exchange mechanism.
3. A T+1 settlement cycle has been implemented for equity trades.
4. The Nifty 50 is the benchmark index of the Bombay Stock Exchange.
Which of the statements given above are correct?
✅ Correct answer: (C) CAPITAL MARKET. PRIMARY market: new securities are issued (IPO - first time to the public; FPO - follow-on public offer; rights issue; QIP - qualified institutional placement; preferential allotment); the company receives the money. SECONDARY market: trading of existing securities among investors on exchanges (NSE, BSE) - the company does not receive the money. OFS (2012): promoters/large shareholders of listed companies sell shares transparently via the exchange's OFS window (a disinvestment route for the Government too). T+1 settlement (trade date plus one working day) was phased in from February 2022 and fully implemented for all equities by 27 January 2023 - India being among the first major markets. Depositories (NSDL 1996, CDSL 1999) hold securities in dematerialised form. Sensex is the BSE index; Nifty 50 belongs to the NSE, so statement 4 is wrong.
4. With reference to the payment and settlement systems in India, consider the following statements:
1. The Payment and Settlement Systems Act, 2007 designates the RBI as the authority for regulating payment systems.
2. The National Payments Corporation of India (NPCI), an umbrella organisation for retail payments, was set up in 2008, and UPI was launched in 2016.
3. RTGS is used for high-value transactions, with a minimum value of Rs 2 lakh.
4. NEFT settles each transaction individually in real time.
Which of the statements given above are correct?
✅ Correct answer: (B) PAYMENT SYSTEMS. The PSS Act 2007 empowers the RBI (through its Board for Regulation and Supervision of Payment and Settlement Systems) to authorise and regulate payment systems. NPCI (not-for-profit, promoted by the RBI and the Indian Banks' Association in 2008) runs RuPay, IMPS, UPI (2016), BHIM, Bharat BillPay, NETC (FASTag) and NACH. RTGS: real-time gross settlement, each transaction settled individually, minimum Rs 2 lakh. NEFT: Deferred Net Settlement - transactions are settled in half-hourly batches (available 24x7 since December 2019), no minimum or maximum; hence statement 4 is wrong. UPI is an instant real-time interoperable mobile payment system; the RBI's e-rupee (CBDC) pilot started in December 2022. The Government has maintained that UPI remains free for person-to-person transactions.
5. With reference to foreign investment in India, consider the following statements:
1. An individual Foreign Portfolio Investor's holding in an Indian company is limited to below 10 per cent of the post-issue paid-up equity capital.
2. If the holding crosses the limit, it must be reclassified as Foreign Direct Investment or divested.
3. FDI policy is framed by the DPIIT, while the RBI regulates inflows under the Foreign Exchange Management Act, 1999.
4. Participatory Notes are issued by registered FPIs to overseas investors who are not directly registered with SEBI.
5. FDI in all sectors requires prior approval of the Government.
Which of the statements given above are correct?
✅ Correct answer: (B) FOREIGN INVESTMENT. FDI: lasting interest, 10% or more of paid-up equity, with management control; FPI: portfolio investment in listed securities, each investor below 10% (and aggregate FPI limits tied to the sectoral cap); a breach pushes the holding to FDI or requires divestment within a time limit. P-Notes (offshore derivative instruments) are issued by SEBI-registered FPIs to overseas clients. FDI routes: AUTOMATIC (no prior approval; most sectors) and GOVERNMENT (approval through the DPIIT portal, for sensitive sectors such as some in defence, print media, multi-brand retail); so statement 5 is wrong. DPIIT (Ministry of Commerce) formulates the policy through the consolidated FDI policy circular; the RBI regulates the remittance and reporting under FEMA 1999 (which replaced FERA 1973). FPIs are more volatile ('hot money') than FDI.
6. Consider the following statements regarding Payments Banks and Small Finance Banks in India:
1. Payments Banks cannot extend loans or issue credit cards.
2. A Payments Bank can accept deposits up to a limit of Rs 2 lakh per individual customer.
3. Small Finance Banks are required to extend 75 per cent of their Adjusted Net Bank Credit to the priority sector.
4. Both categories were recommended by the Nachiket Mor Committee.
Which of the statements given above are correct?
✅ Correct answer: (C) DIFFERENTIATED BANKS. The Nachiket Mor Committee (Comprehensive Financial Services for Small Businesses and Low-Income Households, 2013-14) recommended payments banks and small finance banks to deepen financial inclusion. Payments Banks (minimum capital Rs 100 crore; first licences 2015, e.g. India Post Payments Bank, Airtel, Paytm): accept demand deposits (current/savings) up to Rs 2 lakh per customer (raised from Rs 1 lakh in 2021), provide payments and remittances, but CANNOT lend or issue credit cards; they invest the funds in government securities and must maintain CRR/SLR. Small Finance Banks (minimum capital Rs 200 crore, later Rs 200 crore for new): cater to unserved segments, with 75% of ANBC to the priority sector and at least 50% of loans up to Rs 25 lakh; they can lend and later become universal banks. All four statements are correct.
7. Arrange the following landmarks of Indian banking in chronological order:
A. Nationalisation of the Imperial Bank of India to form the State Bank of India
B. Nationalisation of 14 major commercial banks
C. Nationalisation of six more commercial banks
D. Submission of the first Narasimham Committee report on the financial system
Select the correct answer using the code given below:
✅ Correct answer: (C) BANKING MILESTONES. 1955: the Imperial Bank of India was taken over to create the State Bank of India (SBI Act 1955). 19 July 1969: 14 banks with deposits above Rs 50 crore nationalised (Banking Companies (Acquisition and Transfer of Undertakings) Ordinance/Act 1969), a step linked with the 'social control' of banks (1967) and aimed at directing credit to agriculture and small industry. 15 April 1980: 6 more banks (deposits above Rs 200 crore) nationalised. 1991: Narasimham Committee I began the liberalisation phase. 1993: new private-sector banks permitted. Later: 2017 SBI associate banks merged into SBI; 2019-20 consolidation of PSBs brought their number to 12. Hence A-B-C-D.
8. Assertion (A): Infusion of fresh capital by the Government into a public sector bank can raise its capital adequacy ratio even if its lending does not increase.
Reason (R): The Capital to Risk-weighted Assets Ratio is the ratio of eligible regulatory capital to risk-weighted assets, so additional capital increases the numerator.
Which one of the following is correct?
✅ Correct answer: (A) RECAPITALISATION LOGIC. CRAR = (Tier 1 + Tier 2 capital) / Risk-Weighted Assets. Tier 1 (going-concern capital): CET1 (equity capital, retained earnings, reserves) + Additional Tier 1 (perpetual instruments); Tier 2 (gone-concern): subordinated debt, revaluation reserves, general provisions up to a cap. Capital infusion raises the numerator while RWA is unchanged, so CRAR improves; the other levers are shedding risk (reducing RWA via lower-risk assets) and writing off NPAs. Government recapitalised PSBs through budgetary support and recapitalisation bonds (the Indradhanush plan 2015, the Rs 2.11 lakh crore package of 2017). The risk-weight concept: cash 0%, government securities 0%, home loans 35-75% depending on LTV, corporate loans 100% or by rating, unrated higher - so a shift from corporate loans to G-secs reduces RWA without new capital.
9. Consider the following statements about the cooperative credit structure in India:
1. The short-term rural cooperative credit structure is a three-tier system consisting of State Cooperative Banks, District Central Cooperative Banks and Primary Agricultural Credit Societies.
2. Urban Cooperative Banks are subject to dual control, with the RBI regulating banking functions and the Registrar of Cooperative Societies looking after management.
3. The Banking Regulation (Amendment) Act, 2020 extended the RBI's powers over the management and governance of cooperative banks.
4. NABARD was established in 1969 on the recommendation of the Shivaraman Committee.
Which of the statements given above are correct?
✅ Correct answer: (C) COOPERATIVE BANKING. Short-term rural: StCB (state apex) -> DCCB (district) -> PACS (village); long-term: State Cooperative Agriculture and Rural Development Banks. NABARD refinances StCBs, which refinance DCCBs, which finance PACS. UCBs: dual regulation - RBI (banking: licensing, CRR/SLR, interest rates, prudential norms) and the Registrar of Cooperative Societies (incorporation, management, audit, liquidation). The Banking Regulation (Amendment) Act 2020, enacted after the PMC Bank failure, applied RBI's power to supersede boards, approve CEOs and regulate governance, and to frame reconstruction/amalgamation schemes, to cooperative banks (not to PACS or cooperative societies lending only to members for agriculture). NABARD was established in July 1982 (not 1969) on the Shivaraman Committee's recommendation, so statement 4 is wrong. The Ministry of Cooperation (created July 2021) now supervises cooperative policy.
10. With reference to the implementation of Basel III norms in India, consider the following statements:
1. The minimum total capital to risk-weighted assets ratio prescribed by the RBI is 9 per cent.
2. A Capital Conservation Buffer of 2.5 per cent of risk-weighted assets, to be met with Common Equity Tier 1, is prescribed over and above the minimum, taking the total requirement to 11.5 per cent.
3. Basel III introduced the Liquidity Coverage Ratio and the Net Stable Funding Ratio.
4. Punjab National Bank is classified as a Domestic Systemically Important Bank (D-SIB).
Which of the statements given above are correct?
✅ Correct answer: (A) BASEL III IN INDIA. Basel norms of the Basel Committee on Banking Supervision (BIS) set capital and liquidity standards. India's RBI is stricter than the Basel minimum of 8%: total capital (CRAR) 9%, Tier 1 7%, Common Equity Tier 1 (CET1) 5.5%, plus a Capital Conservation Buffer of 2.5% (CET1) giving 11.5% total. Pillar 1: minimum capital for credit, market and operational risk; Pillar 2: supervisory review (ICAAP); Pillar 3: market discipline (disclosures). Basel III added the leverage ratio, a countercyclical buffer, LCR (high-quality liquid assets to cover 30-day stressed outflows, minimum 100%) and NSFR (stable funding over one year). D-SIBs (too big to fail) carry extra CET1 surcharges; the RBI's list comprises SBI, ICICI Bank and HDFC Bank - not PNB, so statement 4 is wrong.
11. A bank has Common Equity Tier 1 capital of Rs 400 crore, Additional Tier 1 capital of Rs 200 crore, Tier 2 capital of Rs 200 crore and risk-weighted assets of Rs 8,000 crore. Consider the following statements:
1. The capital to risk-weighted assets ratio of the bank is 10 per cent.
2. The bank meets the RBI's minimum CRAR of 9 per cent.
3. The CET1 ratio is 5 per cent, which satisfies the RBI's minimum CET1 requirement of 5.5 per cent.
4. The Tier 1 ratio is 7.5 per cent, which satisfies the minimum Tier 1 requirement of 7 per cent.
Which of the statements given above are correct?
✅ Correct answer: (A) CAPITAL RATIOS. Tier 1 = CET1 + AT1 = 400 + 200 = 600; total capital = 600 + 200 (Tier 2) = 800. CRAR = 800 / 8,000 = 10% (statement 1 correct; above the 9% minimum, statement 2 correct). CET1 ratio = 400 / 8,000 = 5%, which is BELOW the RBI's minimum 5.5%, so statement 3 is wrong - the bank breaches the CET1 minimum even though overall CRAR is adequate (it would also fall short of the 2.5% capital conservation buffer implied total of 11.5%, restricting dividends). Tier 1 ratio = 600 / 8,000 = 7.5%, above the 7% minimum (statement 4 correct). Lesson: check each tier separately - a bank can satisfy the total ratio while failing a component ratio because Tier 2 cannot substitute for CET1, and under PCA a breach of CET1 or CRAR triggers action.
12. Match List-I (Category) with List-II (Description) as per the RBI's asset classification norms and select the correct answer using the code given below:
List-I (Category)
List-II (Description)
(A)Sub-standard asset
(1)An NPA for a period not exceeding 12 months
(B)Doubtful asset
(2)An asset that has remained in the sub-standard category for 12 months
(C)SMA-1
(3)A special mention account with principal or interest overdue for 31 to 60 days
(D)Loss asset
(4)An asset identified as uncollectible, to be written off wholly or partly
✅ Correct answer: (D) ASSET CLASSIFICATION. An asset becomes a Non-Performing Asset (NPA) when interest or principal remains overdue for MORE than 90 days (term loans). Sub-standard: NPA for up to 12 months; Doubtful: sub-standard for 12 months or more (D1, D2, D3 by duration, with higher provisioning); Loss: identified (by bank, auditor or RBI) as uncollectible. Before an account becomes an NPA, it is flagged under Special Mention Accounts: SMA-0 (overdue 1-30 days), SMA-1 (31-60 days), SMA-2 (61-90 days) - early-warning categories. Provisioning rises with severity (about 15% on secured sub-standard, 100% on loss). Key ratios: Gross NPA ratio = Gross NPAs / Gross advances; Net NPA = Gross NPA - provisions; Provision Coverage Ratio = provisions / Gross NPAs. Correct code: A-1, B-2, C-3, D-4.
13. Consider the following statements about the Securities and Exchange Board of India (SEBI):
1. It was established in 1988 as a non-statutory body and given statutory powers by the SEBI Act, 1992.
2. Appeals against its orders lie to the Securities Appellate Tribunal and thereafter to the Supreme Court.
3. It regulates mutual funds, portfolio managers and stock exchanges.
4. Its Chairman is appointed by the Governor of the Reserve Bank of India.
Which of the statements given above are correct?
✅ Correct answer: (C) SEBI. Set up administratively in April 1988 under the Ministry of Finance, SEBI got statutory status through the SEBI Act 1992 (after the 1992 securities scam). Its triple role: protect investor interest, promote development of the securities market and regulate it. It has quasi-legislative (regulations), quasi-judicial (adjudication, penalties) and executive (inspection, enforcement) powers. Its board consists of a Chairman, two members from the Union Finance Ministry, one member from the RBI and five other members, all appointed by the Central Government. Orders are appealed before the Securities Appellate Tribunal (SAT), then the Supreme Court. It regulates depositories (NSDL, CDSL), mutual funds, FPIs, credit rating agencies and, since 2015 (merger of FMC), commodity derivatives. The Chairman is appointed by the Government, not by the RBI Governor, so statement 4 is wrong.
14. Match List-I (Legislation) with List-II (Purpose) and select the correct answer using the code given below:
List-I (Legislation)
List-II (Purpose)
(A)SARFAESI Act, 2002
(1)Establishment of Debt Recovery Tribunals
(B)Recovery of Debts and Bankruptcy Act, 1993 (RDDBFI)
(2)Time-bound insolvency resolution through the NCLT
(C)Insolvency and Bankruptcy Code, 2016
(3)Licensing and regulation of banking companies
(D)Banking Regulation Act, 1949
(4)Enforcement of security interest by banks without court intervention
✅ Correct answer: (C) RECOVERY ARCHITECTURE. SARFAESI Act 2002 lets secured creditors take possession of and sell secured assets after a 60-day notice (Sec. 13(2)) without going to court, for debts above Rs 1 lakh, and permits Asset Reconstruction Companies (ARCs) to buy NPAs; appeals lie to the DRT. The RDDBFI Act 1993 created Debt Recovery Tribunals (and appellate DRATs) for dues above Rs 20 lakh. The IBC 2016 provides a time-bound creditor-driven resolution (CIRP) under the NCLT with the Insolvency and Bankruptcy Board of India (IBBI) as regulator. The Banking Regulation Act 1949 (applied to cooperative banks through 2020 amendment) covers licensing, branch opening, capital, management and RBI's power to supersede boards. The NARCL ('bad bank', 2021) buys stressed assets, and the IDRCL manages them. Correct code: A-4, B-1, C-2, D-3.
15. Consider the following statements about Non-Banking Financial Companies (NBFCs) in India:
1. They cannot accept demand deposits.
2. They cannot issue cheques drawn on themselves.
3. Deposit insurance facility of the DICGC is not available to depositors of NBFCs.
4. NBFC deposits are insured up to Rs 5 lakh per depositor.
Which of the statements given above are correct?
✅ Correct answer: (B) NBFC vs BANK. An NBFC is a company registered under the Companies Act 1956/2013 and with the RBI under the RBI Act 1934 (Sec. 45-IA) engaged in lending, hire purchase, leasing, investment in securities, etc.; it cannot accept demand deposits, is not part of the payment and settlement system as a drawee (cannot issue cheques on itself), does not have access to the DICGC deposit insurance, and does not have to maintain CRR (it maintains SLR-like liquid assets only if it takes public deposits). A bank can accept demand deposits, issue cheques, and is covered by DICGC (up to Rs 5 lakh). NBFC categories include Investment and Credit Companies, Infrastructure Finance Companies, Core Investment Companies, Microfinance Institutions, and Housing Finance Companies (now regulated by the RBI after the NHB powers shifted in 2019-2020). Up to 100% FDI is allowed under the automatic route in NBFC activities. Statement 4 is wrong.
16. Under the RBI's Scale-Based Regulation (SBR) framework for NBFCs, consider the following statements:
1. NBFCs are categorised into four layers: Base, Middle, Upper and Top.
2. The Top Layer is ordinarily empty and is populated only if the RBI finds a significant increase in the potential systemic risk of Upper Layer NBFCs.
3. NBFCs identified in the Upper Layer are required to be listed on a stock exchange within a prescribed time.
4. The Top Layer consists of the ten largest NBFCs by asset size.
Which of the statements given above are correct?
✅ Correct answer: (B) SCALE-BASED REGULATION (effective October 2022). The RBI moved from an activity-based to a size/risk-based regime: BASE LAYER (smaller, non-deposit NBFCs, P2P lending platforms, Account Aggregators, NBFC-MFIs, non-operative financial holding companies); MIDDLE LAYER (deposit-taking NBFCs, standalone primary dealers, housing finance companies, NBFCs with assets of Rs 1,000 crore or more); UPPER LAYER (the top 50 NBFCs by asset size plus others identified by the RBI on a scoring methodology; they face enhanced capital, governance and the requirement of listing within three years of identification); TOP LAYER (empty unless the RBI sees a sharp rise in systemic risk, with higher regulatory requirements). The 'top 10 by size' in statement 4 is wrong; the Top Layer is a contingent category. Why: the 'shadow banking' crisis of IL&FS (2018) showed how big NBFCs can transmit systemic risk.
17. Consider the following statements about the RBI's Prompt Corrective Action (PCA) framework:
1. It is an early supervisory intervention applied to banks showing signs of financial weakness.
2. The triggers include breaches of capital ratios, net NPA levels and negative return on assets for consecutive years.
3. Restrictions under it can include curbs on dividend distribution, branch expansion and management compensation.
4. The framework is invoked by the Securities and Exchange Board of India on the recommendation of the Finance Ministry.
Which of the statements given above are correct?
✅ Correct answer: (D) PCA. The PCA framework (revised in April 2017) is a RBI tool for early supervisory intervention: the RBI monitors capital (CRAR/CET1), asset quality (net NPA), profitability (return on assets) and leverage; breaching defined risk thresholds triggers mandatory actions (restrictions on dividend, branch expansion, directors' compensation, and curbs on fresh lending in severe cases) and discretionary actions (special audit, restructuring of operations, change in management). Several public-sector banks were under PCA in 2017-2019 and exited after improving. Because the RBI is the banking regulator, it - not SEBI - invokes PCA, so statement 4 is wrong. A parallel framework exists for NBFCs (PCA for NBFCs, 2022). Link: PCA complements the Basel III capital buffers, which operate on the capital dimension alone.
18. With reference to deposit insurance in India, consider the following statements:
1. The Deposit Insurance and Credit Guarantee Corporation (DICGC) insures bank deposits up to Rs 5 lakh per depositor per bank.
2. The DICGC is a wholly owned subsidiary of the Reserve Bank of India.
3. The insurance premium is paid by the insured banks and not by the depositors.
4. Under the 2021 amendment, depositors of a bank under moratorium can receive their insured amount within 90 days.
Which of the statements given above are correct?
✅ Correct answer: (B) DICGC. Established in 1978 by merging the Deposit Insurance Corporation and the Credit Guarantee Corporation of India, it insures savings, fixed, current and recurring deposits of all commercial banks (including foreign bank branches, RRBs, SFBs, payments banks) and eligible cooperative banks, up to Rs 5 lakh per depositor per bank (principal + interest), raised from Rs 1 lakh to Rs 5 lakh in February 2020 after the PMC Bank crisis. The DICGC (Amendment) Act 2021 made interim payment within 90 days of a moratorium (45 days to receive claim lists + 45 days to pay). Premium (a flat rate per Rs 100 of assessable deposits) is paid by the bank. Excluded: deposits of foreign governments, inter-bank deposits, deposits of the Central/State governments. All four statements are correct. [Recheck the cover limit in case of any recent change.]
19. With reference to benchmarks for bank lending rates in India, consider the following statements:
1. The Base Rate system replaced the Benchmark Prime Lending Rate system in July 2010.
2. The Marginal Cost of Funds based Lending Rate (MCLR) was introduced in April 2016 as an internal benchmark.
3. From 1 October 2019, new floating-rate retail and MSME loans must be linked to an external benchmark such as the policy repo rate.
4. Under external benchmark-linked loans, banks can change the spread over the benchmark at any time without any condition.
Which of the statements given above are correct?
✅ Correct answer: (D) LENDING BENCHMARKS. BPLR (1970s-2010, opaque, sub-BPLR lending was common) -> Base Rate (July 2010, no loan below it) -> MCLR (April 2016, internal cost-based with tenor-wise MCLR and reset clauses) -> External Benchmark Lending Rate (EBLR) (October 2019, to improve transmission of policy changes). Allowed external benchmarks: the policy repo rate, the 91-day or 182-day T-bill yield (FBIL), or any other FBIL benchmark. Under EBLR, the spread (reflecting credit risk and operating cost) can be changed only when the borrower's credit assessment changes materially, so statement 4 is wrong; the benchmark must be reset at least once every three months. With EBLR, a repo hike passes through to borrowers almost immediately, a point relevant to the October 2026 rate increase.
20. Match List-I (Regulator/Institution) with List-II (Sphere) and select the correct answer using the code given below:
List-I (Regulator/Institution)
List-II (Sphere)
(A)SEBI
(1)Refinance and development of agriculture and rural credit
(B)IRDAI
(2)Regulation of the securities market
(C)PFRDA
(3)Regulation of the pension sector including the National Pension System
(D)NABARD
(4)Regulation of the insurance sector
✅ Correct answer: (B) FINANCIAL REGULATORS. SEBI (statutory since the SEBI Act 1992): securities market, mutual funds, intermediaries and investor protection. IRDAI (IRDA Act 1999): insurance regulation and development. PFRDA (PFRDA Act 2013): regulates the NPS and other pension schemes. NABARD (1982, on the recommendation of the Shivaraman Committee; it took over the refinance functions of the RBI's ACD and the Agricultural Refinance and Development Corporation): apex institution for agriculture and rural credit, supervising cooperative banks and RRBs. RBI regulates banks, NBFCs, payment systems and forex. The Financial Stability and Development Council (FSDC, 2010, chaired by the Union Finance Minister) is a non-statutory body for inter-regulatory coordination and financial stability. Correct code: A-2, B-4, C-3, D-1.
21. With reference to the Insolvency and Bankruptcy Code, 2016, consider the following statements:
1. The National Company Law Tribunal is the Adjudicating Authority for corporate insolvency resolution.
2. The corporate insolvency resolution process is to be completed within 180 days, extendable once by 90 days.
3. A resolution plan requires approval of the Committee of Creditors by at least 66 per cent of the voting share.
4. The Insolvency and Bankruptcy Board of India is chaired by the Governor of the RBI.
Which of the statements given above are correct?
✅ Correct answer: (A) IBC 2016. The Code (recommended by the T.K. Viswanathan / Bankruptcy Law Reforms Committee) consolidated corporate, partnership and individual insolvency. For corporate debtors, the creditor-in-control CIRP starts on admission of an application by a financial creditor, operational creditor (default of Rs 1 crore after 2020) or the corporate debtor itself; an interim resolution professional is appointed and a MORATORIUM (Sec. 14) bars suits and recovery. The Committee of Creditors (financial creditors) approves a plan by 66% of voting share (reduced from 75% in 2018); Sec. 29A bars wilful defaulters and related persons from bidding. If no plan passes, the company goes into liquidation (waterfall in Sec. 53). IBBI is a statutory regulator headed by a Chairperson appointed by the Government - not the RBI Governor. Statement 4 is wrong.
22. With reference to the financial inclusion and social security schemes of the Government of India, consider the following statements:
1. The Pradhan Mantri Jan Dhan Yojana was launched on 28 August 2014 with a focus on universal access to banking.
2. The Pradhan Mantri Jeevan Jyoti Bima Yojana provides life cover of Rs 2 lakh at a premium of Rs 436 per year.
3. The Pradhan Mantri Suraksha Bima Yojana provides accidental death and disability cover of Rs 2 lakh at a premium of Rs 20 per year.
4. The Atal Pension Yojana provides a guaranteed monthly pension of Rs 1,000 to Rs 5,000 after the age of 60.
5. Jan Dhan accounts cannot be given RuPay debit cards.
Which of the statements given above are correct?
✅ Correct answer: (A) SOCIAL SECURITY TRIO + APY. PMJDY (2014): zero-balance basic savings account, RuPay debit card with Rs 2 lakh accident cover (Rs 1 lakh for accounts opened before August 2018), overdraft facility, and the 'JAM trinity' (Jan Dhan-Aadhaar-Mobile) for direct benefit transfer - so statement 5 is wrong. PMJJBY (2015): life cover Rs 2 lakh, ages 18-50, annual premium Rs 436 (raised from Rs 330 in 2022). PMSBY (2015): Rs 2 lakh for accidental death/full disability and Rs 1 lakh for partial disability, ages 18-70, premium Rs 20 (raised from Rs 12 in 2022). APY (2015): for unorganised workers aged 18-40, guaranteed pension of Rs 1,000-5,000 monthly after 60 depending on contribution, with a government co-contribution (for eligible subscribers who joined before 2016). The Economic Survey 2025-26 records about 55 crore Jan Dhan accounts. [Recheck premium and account figures on pmjdy.gov.in / jansuraksha.gov.in.]
23. Consider the following statements about Regional Rural Banks (RRBs):
1. They were established under the Regional Rural Banks Act, 1976 on the basis of the recommendations of the Narasimham Working Group.
2. Their share capital is held 50 per cent by the Central Government, 15 per cent by the State Government and 35 per cent by the sponsor bank.
3. The first RRBs were set up on 2 October 1975.
4. They are regulated by SEBI and supervised by the Ministry of Rural Development.
Which of the statements given above are correct?
✅ Correct answer: (D) RRBs. Created to combine the local feel and familiarity of cooperatives with the commercial banks' professionalism, to serve small and marginal farmers, artisans and rural labourers. The Narasimham Working Group (1975) recommended them; five RRBs were set up on 2 October 1975 (the first at Moradabad, Uttar Pradesh), followed by the RRB Act 1976. Ownership: Centre 50%, State 15%, sponsor bank 35%. They are regulated by the RBI and supervised by NABARD (not by SEBI), and are subject to priority-sector norms; amalgamations since 2005-06 have cut their number sharply. The Banking Laws amendments allow them to raise capital from the market in certain conditions. Statement 4 is wrong.
24. With reference to the Narasimham Committees on banking sector reforms, consider the following statements:
1. The first Committee (1991) recommended a phased reduction of the Statutory Liquidity Ratio to 25 per cent.
2. The first Committee recommended the setting up of special tribunals for faster recovery of dues.
3. The second Committee (1998) recommended a higher capital adequacy requirement than the first Committee.
4. The first Committee recommended raising the priority sector lending target from 40 per cent to 60 per cent.
Which of the statements given above are correct?
✅ Correct answer: (D) NARASIMHAM COMMITTEES. Committee I (Financial System, 1991, M. Narasimham) shaped the 1991 financial-sector reforms: SLR to be brought down in phases to 25% and CRR to 3-5%; prudential norms for income recognition, asset classification and provisioning; capital adequacy of 8% by March 1996 in line with the Basel norm; deregulation of interest rates; freedom to set up private banks; reduction of directed credit (priority sector lending to be cut to about 10%, NOT raised); and special tribunals - which led to the Debt Recovery Tribunals (RDDBFI Act 1993). Committee II (Banking Sector Reforms, 1998) recommended raising capital adequacy to 9% by 2000-01 and 10% by 2002, merging strong banks, 'narrow banking' for weak banks, and reducing government shareholding in PSBs. Thus statement 4 is wrong - the committee wanted LESS directed credit.
25. With reference to Priority Sector Lending (PSL) norms of the RBI for domestic commercial banks, consider the following statements:
1. The overall PSL target is 40 per cent of Adjusted Net Bank Credit or credit equivalent of off-balance-sheet exposure, whichever is higher.
2. The sub-target for agriculture is 18 per cent.
3. The sub-target for lending to weaker sections is 12 per cent.
4. Housing loans of any amount qualify as priority sector lending.
Which of the statements given above are correct?
✅ Correct answer: (C) PSL. Priority sectors (since 1972, formalised for banks in 1980 with the 40% target) are agriculture, micro/small/medium enterprises, export credit, education, housing, social infrastructure, renewable energy and weaker sections. Targets for domestic commercial banks: total 40% of ANBC/CEOBSE (whichever is higher); agriculture 18% (with a sub-target of 10% for small and marginal farmers); micro enterprises 7.5%; advances to weaker sections 12%. Small finance banks: 75%; foreign banks with 20 or more branches: 40%. Banks that miss the target must deposit the shortfall in the Rural Infrastructure Development Fund (RIDF) at NABARD and similar funds; Priority Sector Lending Certificates (PSLCs) allow trading of surplus achievement. Housing loans qualify only up to prescribed limits (they depend on the city category and loan amount), so statement 4 is wrong.