Banking Awareness Model Questions for Bank Exams 1

Banking Awareness

RBI, the Apex Bank of our Country is also called by varied names. To quote, it is

★ The Central Bank of the Country

★ Banker's Bank

★ Banker to Govt

★ Regulator of all Banks and Last but not the least, 'Lender of the Last Resort'.

Functions of RBI

RBI emerged in 1935 but RBI Act came in 1934 itself. Before RBI, there was Imperial Bank of India (IBI) which was discharging many vital functions. IBI was formed in 1921 with the merging of 3 Presidency Banks.

 1. Bank of Bombay

2. Bank of Calcutta

3. Bank of Madras

Subsequently, after RBI came in 1935 & was nationalized in 1949, IBI was converted into SBI and SBI emerged as The Agent of RBI in 1955. Today, RBI is doing many vital functions for monetary stability,  price control, currency issue, FOREX (foreign exchange) management in addition to regulatory functions and licensing authority for all new banks & new bank branches. It assumes a lot of special importance in controlling spiralling price levels (Inflation) by initiating various Measures like  

★ CRR (Cash Reserve Ratio)

★ SLR

★ REPO

★ Reverse REPO

★ Bank Rate

★ MSF

★ SCC Directives etc.

In addition to the above functions, RBI has been managing Public Debt System (PDS) and constantly

monitoring OMO (Open Market Operations) on daily basis. Open Market Operations involve 3 major processes.

1. Issue of G - Bonds (Or) G - Securities (G - SEC)

2. Sale of G- Bonds Issued

3. Redemption (Or) Repayment of Bonds Money after Maturity with Interest.

                Many banks and other financial institutions are investing funds under these bonds which are reckoned by RBI as SLR (Statutory Liquidity Ratio) Investments under section 24 of Banking Regulation Act 1949.

RBI has also been monitoring 'FOREX' (Foreign Exchange) transactions in the country which may be inward or outward remittances. Inward Remittances include Hot Money (NRI Remittances), Gift Money, Prize Money, Interest amounts on investment abroad etc...

Outward Remittances are mostly amounts taken for tourism, studies abroad, medical treatment etc., which are constantly monitored by RBI, through verifying remittances returns, submitted by banks  to RBI on every 10th working day. All these transactions are not only monitored but also audited periodically under FEMA 2000 (Foreign Exchange Management Act).

FEMA has come in the place of FERA1976 which was very stringent and all cases booked under this Act were only criminal cases. After economic reforms have ushered in our country in 1992, FERA was replaced by FEMA and under which all cases filed are of civil nature and the gravity of the cases was mitigated to suit liberalization, globalization and opening up of the economy for foreign trade freely.

In fact Laissez Faire Economy (Free Economy) has emerged where any nation can participate in trade

activities in India and can do business freely like China Bazaar bizz etc...

RBI as regulator of all banks in the country has been monitoring Credit Deployment among various sectors especially priority sector lending. All banks in the country have to lend 40% of total advances ANBC (Average Net Bank Credit) to agriculture, housing, education, industry, irrigation etc. termed as Priority Sector lending. For this purpose, RBI has been monitoring C.D. Ratio (Credit Deposit) of individual banks and banks which are falling short of Credit Deposit Ratio in priority sector lending are directed to keep investments in NABARD (National Bank for Agriculture and Rural Development), Rural Development Bonds etc.

RBI has also been monitoring KYC (Know Your Customer) compliance in banks in order to arrest frauds & money laundering. In fact, the entire functions of RBI come under 3 major groups viz.

1. Traditional Functions

2. Regulatory Functions

3. Development Functions

Policy rates, Reserve ratios, lending, and deposit rates  as on 17th of JUNE, 2013

Cash Reserve Ratio --4.00% of NDTL

Statutory Liquidity Ratio--23.0% of NDTL

Repo Rate--7.25%

Reverse Repo Rate--6.25%

Bank Rate--9.00%

Base Rate--9.75% − 10.50%

Marginal Standing Facility (MSF) --9.00 %

Term Deposit Rate-- 8.00/9.25 % (Maximum) ★ For Senior Citizens 0.25 − 0.5% extra.

Questions (Objective type) for the students appearing for RBI & other Bank Exams.

1. CRR stands for ...

a) Cash Reserve Ratio

b) Cash Relation Reserve

c) Current Regulations Reserve

d) Current Rate of Return

2. Present CRR is ....

a) 4% b) 4% of NDTL

c) 4%of Savings Accounts deposits

d) 3%of Current Accounts deposits

3. NDTL consists of (Net Demand Time Liability) ...

a) Current Accounts

b) Savings Accounts

c) Term Deposits

d) All the above with a few adjustments

4. Interest Rate paid on CRR balances is

a) 3% b) 4% c) 6% d) 0%

5. CRR balances are to be kept by banks in

a) Cash only

b) Cash balance with RBI

c) Gold d) G- see

6. Present SLR FOR banks...

a) 22% of total loans

b) 23% of current accounts deposits

c) 25% of savings deposits

d) 23% of NDTL only

7. SLR stands for ....

a) Semi Liquid Ratio

b) Strong Liability Reserve

c) Statutory Liquidity Ratio

d) Statutory Liability Ratio

8. CRR/SLR is kept under .....

a) RBI Act

b) Banking Regulation Act

c) RBI Act & Banking Regulation Act

d) RBI Act & SARFAESI Act

9. SLR money is to be kept by Banks in.....

a) Cash only  b) Gold

c) G-securities only (or) G-bands

d) b and c only

10. REPO stands for and present REPO rate is..

a) Representative offer, 5%

b) Repurchase offer, 7.25%

c) Reverse purchase Rate, 8%

d) Republic offer, 6%

11. Under REPO, RBI ...

a) Gives loans to commercial banks

b) Takes deposits from banks

c) Gives loans to public

d) Gives loans to Govt.

12. CTS of RBI stand for ......

a) Current Transaction System

b) Current Transaction System

c) Cheque Transfer System

d) Cheque Truncation System

13. Under Reverse REPO facility ....

a) Banks get loans from RBI

b) Banks get interest on deposits

c) Banks pay interest at 6.25% on loans

d) co-op banks get loans from RBI

14. Present Bank Rate is ....

a) 5% b) 6% c) 9% d) 8%

15. Bank Rate is the interest rate charged on..

a) Loans taken by banks from banks.

b) Loans taken by banks under Bill discounting.

c) Loans taken by banks under Bills Re-discounting.

d) Loans taken on Gold  

16. MSF of RBI stands for and is meant for....

a) Market Stability Fund for reserve.

b) Marginal Standing Facility for Liquidity Adjustment

c) Marginal Sale Factor.

d) Market Strong Force

17. SCC (Selective Credit Control) directives on food grains & Oil Seeds are given by RBI for

a) Controlling Hoarding

b) Controlling speculation

c) Controlling Money Laundering

d) a & b only

18. PMLA 2002 is for...

a) Stopping inflation.

b) Arresting money laundering

c) Stopping new loans in Banks

d) Arresting frauds.

19. KYC Day is observed on ....

a) 1st April b) 1st July

c) 1st May d) 1st Aug

20. Bank Notes means

a) All 1 Rs. note

b) All 2 Rs. notes

c) Rs. 2 and above up to Rs.100/-.

d) Rs. 2 and above up to Rs.1000/-

21. When did the RBI become a State owned institution?

a) 1943 b) 1947

c) 1949 d) 1952

22. RBI head quarter's is there in?

a) Delhi b) Mumbai

c) Nasik d) Hyderabad

23. How many regional offices do RBI has?

a) 19 b) 23 c) 27 d) 29

24. Who among the following is the Deputy Governor of RBI?

a) Dr. Indira Raja Raman

b) Dr. Anil Kakodkar

c) Dr. K.C Chakrabarty

d) Dr. Karthi Keyan

25. Which of the following is not included in the foreign-exchange reserves of India?

a) Foreign-currency assets held by the RBI

b) Gold holding of the RBI

c) Silver holding of the RBI

d) Personal Deposit Accounts