FREE IBPS Banking and Financial Awareness 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?

Accepted Answer

Real-Time Gross Settlement (RTGS)

Answer

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?

Accepted Answer

Offering a basic savings account with a RuPay debit card and overdraft facility.

Answer

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?

Accepted Answer

To absorb excess liquidity from the banking system without needing collateral.

Answer

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?

Accepted Answer

Commercial Paper (CP)

Answer

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?

Accepted Answer

To provide a time-bound process for resolving insolvency to maximize the value of assets.

Answer

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.

IBPS - Institute of Banking Personnel Selection Practice Test

IBPS - Institute of Banking Personnel Selection Practice Test

FREE IBPS Banking and Financial Awareness Questions and Answers