Banking Awareness Questions and Answers

1. What is/are the main functions of RBI?
(i). Notes Issuance.
(ii). Government’s Bankar.
(iii). Banker’s Bank.
(iv). Bank’s Supervision.
A. Only (i)
B. Both (ii) and (iii)
C. Both (iii) and (iv)
D. All of these.

Answer with Explanation
Answer: Option D
Explanation:

Reserve Bank of India (RBI) is the supreme banking authority of India. All the public & private sector banks or any financial institution in India are controlled by RBI.

RBI is responsible for issuing, exchanging or destroying of currency.

RBI acts as a merchant banker for the Central and State Government. RBI maintains all the banking accounts of the scheduled banks.

RBI operate all the financial and banking operations in India.

Know more : Indian Banking System

2. In India, Microfinance development and Equity fund is maintained by-
A. Small industries development Bank of India(SIDBI).
B. RBI(Reserve bank of India).
C. Nabard(National bank for Agriculture and rural development).
D. CII(Confederation of industries in India).

Answer with Explanation
Answer: Option A
Explanation:

Small Industries Development Bank of India (SIDBI) set up on April 2, 1990. It is headquartered at Lucknow, Uttar Pradesh, India. SIDBI is playing the role for the growth and development of Micro, Small and Medium Enterprises (MSME).

3. Which of the following rate is decided by the Reserve Bank of India(RBI), is called “Policy Rate”?
A. Cash reserve ratio.
B. Lending rate.
C. Bank rate.
D. Deposite rate.

Answer with Explanation
Answer: Option A
Explanation:

Cash reserve ratio (CRR) is the funds that all the scheduled bank have to maintain with the Reserve Bank of India(RBI), the supreme banking authority of India. By increasing the CRR RBI drain out excessive funds from the scheduled banks.

Example: Suppose the CRR is 5%. A person/customer open a Savings bank account with Rs. 10,000 in State Bank of India. So now State Bank of India has to park Rs. 500 to the Reserve Bank of India (RBI) as per the CRR rate.

5% of 10,000 = 500 (CRR= 5%).

4. As per newspaper report, one of the major public sector banks sold out its RS. 500 Cr. loan to IIFCL(India Infrastructure Finance Company Limited). This type of buying and selling of loans in the banking sector is popularly known as,
A. Teaser rate financing.
B. Take-out financing.
C. Infrastructure financing.
D. Development financing.

Answer with Explanation
Answer: Option B
Explanation:

Take-out financing is a kind of long-term financing by the banks. Like 15-20 years. It is also called as ‘Take-out Loan’. Usually, Take-out financing is used for real property and commercial purposes.

5. ‘kfw’ group released another instalment of its financial aid to India. ‘kfw’ is an organisation/bank base in;
A. France.
B. Japan.
C. Germany.
D. China.

Answer with Explanation
Answer: Option C
Explanation:

‘Kfw’ is financial and banking group of Germany. It is Government owned group/bank founded in 1948. It is headquartered in Frankfurt, Germany.

6. Retail Banking refers to the dealing of commercial banks with individual customers on,
(i) Liabilities.
(ii) Assets.
A. only i.
B. only ii.
C. both i and ii.
D. None of these.

Answer with Explanation
Answer: Option C
Explanation:

Retail banking is a banking system where banks (Basically larger commercial banks) directly deals with the customers.

In retail banking services offered like; Savings Account, Checking/Transactional Account, Debit Cards, Credit Cards, Personal Loans, Mortgages, Certificate of Deposits and etc.

7. Wholesale banking is also called as,
(i) Corporate banking.
(ii) Commercial banking.
A. only i.
B. only ii.
C. both i and ii.
D. None of these.

Answer with Explanation
Answer: Option C
Explanation:

Wholesale banking is the services offered by a merchant bank to other banks and financial institutions (Large corporate clients, Real Estate Developers and etc.).

Where Retail banking is the banking with small individual customers.

8. With respect to wholesale banking, ‘term landing’ is a,
(i) Fund based service.
(ii) Non-fund based service.
A. only i.
B. only ii.
C. both i and ii.
D. None of these.

Answer with Explanation
Answer: Option B
Explanation:
No explanation for this question.

9. In banking the term DTL refers to;
A. Detail time limit.
B. Demand and time limit.
C. Demand and time liabilities.
D. None of these.

Answer with Explanation
Answer: Option C
Explanation:
No explanation for this question.

10. Cash reserve ratio(CRR) refers to,
A. Cash that all banks are require to maintain with RBI.
B. Certain percentage of DTL of all banks.
C. Both a & b.
D. None of these.

Answer with Explanation
Answer: Option C
Explanation:

Cash reserve ratio (CRR) is the funds that all the scheduled bank have to maintain with RBI.

Example: Suppose the CRR is 4% . Someone opens a bank account with Rs. 5000 in SBI. So now SBI has to park Rs. 200 to RBI as per the CRR rate.

4% of 5000 = 200

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