Free IBPS Banking and Financial Awareness Questions and Answers — Questions and Answers
Question 1: A business needs to make a high-value payment of ₹10 lakhs to a supplier immediately. The transaction must be settled on a one-to-one basis and not in batches. Which of the following payment systems would be most suitable for this requirement?
- National Electronic Funds Transfer (NEFT)
- Immediate Payment Service (IMPS)
- Real-Time Gross Settlement (RTGS) (Correct answer)
- Unified Payments Interface (UPI)
Correct answer: Real-Time Gross Settlement (RTGS)
Real-Time Gross Settlement (RTGS) is the ideal system for this scenario. It is designed for high-value transactions (the minimum amount is ₹2 lakh) and settles them individually (gross settlement) in real-time. NEFT settles transactions in batches, which is not immediate. IMPS is real-time but generally has a lower maximum transaction limit (e.g., ₹5 lakhs) compared to RTGS. UPI is also real-time but has much lower transaction limits, making it unsuitable for a ₹10 lakh payment.
Question 2: Which of the following is a key feature of the Pradhan Mantri Jan Dhan Yojana (PMJDY) aimed at promoting financial inclusion?
- Provision of a mandatory credit card with a high limit.
- Requirement of a significant initial deposit to open an account.
- Offering a basic savings account with a RuPay debit card and overdraft facility. (Correct answer)
- Exclusively available for residents of urban areas.
Correct answer: Offering a basic savings account with a RuPay debit card and overdraft facility.
The Pradhan Mantri Jan Dhan Yojana (PMJDY) is a national mission for financial inclusion that provides access to financial services for all households. A core feature is the provision of a Basic Savings Bank Deposit (BSBD) account which can be opened with zero balance. These accounts come with a RuPay debit card, accident insurance cover, and an overdraft facility after a period of satisfactory operation. The scheme does not require a significant deposit, does not provide a mandatory high-limit credit card, and is available to all unbanked adults in both rural and urban areas.
Question 3: The Reserve Bank of India (RBI) introduced the Standing Deposit Facility (SDF) as a monetary policy instrument. What is the primary purpose of the SDF?
- To inject liquidity into the banking system by providing collateralized loans.
- To absorb excess liquidity from the banking system without needing collateral. (Correct answer)
- To finance government expenditure through direct lending.
- To set the interest rate for long-term loans given to corporate entities.
Correct answer: To absorb excess liquidity from the banking system without needing collateral.
The Standing Deposit Facility (SDF) is a tool used by the RBI to absorb excess liquidity from commercial banks. Its unique feature is that banks can park their surplus funds with the RBI without the RBI having to provide government securities as collateral in return. This removes the 'binding constraint' on the central bank's ability to absorb liquidity, making it a powerful tool for managing money supply. The SDF rate acts as the floor for the Liquidity Adjustment Facility (LAF) corridor.
Question 4: Which of the following is considered a money market instrument?
- Equity Shares
- Corporate Bonds
- Government Securities (G-Secs) with 10-year maturity
- Commercial Paper (CP) (Correct answer)
Correct answer: Commercial Paper (CP)
The money market deals with short-term borrowing and lending with a maturity of up to one year. Commercial Paper (CP) is an unsecured, short-term debt instrument issued by corporations, making it a classic money market instrument. Equity Shares, Corporate Bonds, and long-term G-Secs are all capital market instruments as they are used for long-term financing and have maturities exceeding one year (or no maturity in the case of equities).
Question 5: The Insolvency and Bankruptcy Code (IBC), 2016 was enacted to consolidate the legal framework for insolvency resolution in India. What is a primary objective of the IBC?
- To ensure that all failing businesses are immediately liquidated.
- To prioritize the recovery of government taxes over all other debts.
- To provide a time-bound process for resolving insolvency to maximize the value of assets. (Correct answer)
- To allow debtors to indefinitely delay repayment proceedings.
Correct answer: To provide a time-bound process for resolving insolvency to maximize the value of assets.
A primary objective of the Insolvency and Bankruptcy Code, 2016, is to create a consolidated framework for a time-bound resolution of insolvency. By setting strict timelines (e.g., 180 days, extendable to 330), the code aims to resolve financial distress quickly, which helps in maximizing the value of the assets of a corporate debtor rather than letting them erode over time. It prioritizes resolution and revival over liquidation and balances the interests of all stakeholders.
Question 6: Which of the following Acts provides the Reserve Bank of India (RBI) with the power to license, regulate, and supervise banking companies in India?
- Reserve Bank of India Act, 1934
- Companies Act, 2013
- Banking Regulation Act, 1949 (Correct answer)
- Securities and Exchange Board of India Act, 1992
Correct answer: Banking Regulation Act, 1949
The Banking Regulation Act, 1949 is the primary legislation that gives the RBI comprehensive powers to regulate the banking sector in India. This includes the authority to grant licenses to banks, conduct inspections, give directions on banking policy, control appointments of bank management, and ensure the protection of depositors' interests. While the RBI Act, 1934 establishes the RBI and its functions as a central bank, the Banking Regulation Act specifically governs the operations of banking companies.
Free IBPS Banking and Financial Awareness Questions and Answers
A business needs to make a high-value payment of ₹10 lakhs to a supplier immediately.
The transaction must be settled on a one-to-one basis and not in batches.
Which of the following payment systems would be most suitable for this requirement?