Financial Markets and Banking Operations

1. 205 FMBO
MCQ

2. Who is the central banking authority in
India?
1. RBI
2. NABARD
3. Ministry of Finance
4. SEBI
Answer: (1)
The Reserve Bank of India (RBI) is India’s central bank,
responsible for the issue and supply of the Indian rupee
and the regulation of the Indian banking system

3. Which among the following is not one of
the functions of RBI?
1. Controlling inflation
2. Banking Supervision
3. Lender of last resort
4. Controlling employment in the country
Answer:(4)
Functions of RBI includes Monetary Authority, Regulator
and supervisor of the financial system, Manager of
Foreign Exchange, Issuer of Currency, Regulator and
Supervisor of Payment and Settlement Systems, Banker
to Government:, Banker to Banks, Lendor of last resort,
Controlling inflation

4. • To operate as NBFC in India, one has to
take license from _____.
1. SEBI
2. RBI
3. MoF
4. FICCI
Answer: (2)
NBFC (Non-Banking Financial Company) is a company registered under Companies Act,
2013 or earlier Companies Act, 1956. The Reserve Bank of India has defined financial
activity as principal business to bring clarity to the entities that will be monitored and
regulated as NBFC under the RBI Act. The criteria s is called as the 50-50 test and its as
follows:
– The company’s financial assets must constitute 50 per cent of the total assets.
– The income from financial assets must constitute 50 per cent of the total income.
It is governed by the Ministry of Corporate Affairs as well as the Reserve Bank of India. The
License for operation is obtained from the RBI and it is incorporated as a company under
applicable laws of the land.

5. • Which among the following financial
instruments are dealt by Primary
Dealers?
1. Bonds
2. Mutual Funds
3. Government securities
4. Debentures
Answer: (3)
Primary dealers are registered entities with the RBI
who have the license to purchase and sell
government securities.

6. • . Name the section that mandate banks to
maintain CRR with RBI?
1. Section 42(1) RBI Act
2. Section 24(1) RBI Act
3. Section 42(1) BR Act
4. Section 24(1) BR Act
Answer: (1)
In terms of Section 42(1) of the RBI Act, 1934 the Reserve
Bank, having regard to the needs of securing the monetary
stability in the country, prescribes the CRR for SCBs without
any floor or ceiling rate. The current CRR is 3%

7. • Which out of the following liquid assets
is not a part of SLR?
1. Cash
2. Govt Securities
3. Gold
4. Bonds
Answer: (4)
Statutory Liquidity Ratio or SLR is the
minimum percentage of deposits that a
commercial bank has to maintain in the form
of liquid cash, gold or other securities.

8. • Who is the regulator of insurance sector
in India?
1. SEBI
2. IRDAI
3. NABARD
4. PFRDA
Answer: (2)
Insurance Regulatory and Development Authority of
India (IRDAI), is a statutory body formed under an Act of
Parliament, i.e., Insurance Regulatory and Development
Authority Act, 1999 (IRDAI Act 1999) for overall supervision
and development of the Insurance sector in India

9. • Name India’s first listed exchange?
1. MCX
2. NSE
3. BSE
4. OTC Exchange of India
Answer: (1)
The Multi Commodity Exchange of India Limited
(MCX), India’s first listed exchange, is a state-of-the-art,
commodity derivatives exchange that facilitates online
trading of commodity derivatives transactions, thereby
providing a platform for price discovery and risk
management

10. MCX deals with trading of ___.
1. Stocks
2. Gold
3. Commodity futures
4. None of the Above
Answer: (3)
The Multi Commodity Exchange of India Limited (MCX),
India’s first listed exchange, is a state-of-the-art, commodity
derivatives exchange that facilitates online trading of
commodity derivatives transactions, thereby providing a
platform for price discovery and risk management

11. • Who provides clearing house facilities
for netting of payments and securities
delivery?
1. Stock exchange
2. RBI
3. SEBI
4. SBI
Answer: 1

12. • Which act paved the way for
establishment of Reserve Bank of
India?
1. RBI Act, 1934
2. RBI Act, 1930
3. RBI Act, 1924
4. RBI Act, 1920
Answer: (1)
The Reserve Bank of India was established on
April 1, 1935 in accordance with the provisions of
the Reserve Bank of India Act, 1934.

13. • RBI has started its functioning w.e.f
___?
1. 1st January 1935
2. 1st March 1935
3. 1st April 1935
4. 1st June 1935
Answer: (3)
The Reserve Bank of India was established
on April 1, 1935 in accordance with the
provisions of the Reserve Bank of India Act,
1934.

14. • What is the maximum number of deputy
governors can be there in RBI?
1. One
2. Two
3. Three
4. Four
Answer: (4)
Reserve Bank of head by Governor of RBI. It
consists of not more than four Deputy Governors

15. • What % of interest is paid by RBI on CRR
deposit maintained by Scheduled
Commercial Banks with it?
1. No interest rate
2. 1%
3. 2%
4. 3%
Answer: (1)
The Reserve Bank does not pay any interest on
the CRR balances maintained by SCBs with effect
from the fortnight beginning March 31, 2007.

16. • Where does headquarters of RBI is
situated at?
1. New Delhi
2. Kolkata
3. Chennai
4. Mumbai
Answer: (4)
The Central Office of the Reserve Bank was initially
established in Kolkata but was permanently moved
to Mumbai in 1937.

17. • How much percent of CRR requirement
scheduled commercial banks have to
maintain on daily basis during the
fortnight?
1. 60%
2. 70%
3. 80%
4. 95%
Answer: (4)
The banks will be required to maintain a minimum
of 95 per cent of CRR requirement on daily basis
during the fortnight

18. • What is the penal interest bank have to pay to
RBI if it cannot maintain mandatory CRR
requirement on daily basis?
1. Bank rate + 3%
2. Bank rate + 4%
3. Bank rate + 5%
4. Bank rate + 6%
Answer: (1)
In case of default in maintenance of CRR requirement on a daily basis which is
currently 95 per cent of the total CRR requirement, penal interest will be
recovered for that day at the rate of three per cent per annum above the Bank
Rate on the amount by which the amount actually maintained falls short of the
prescribed minimum on that day and if the shortfall continues on the next
succeeding day/s, penal interest will be recovered at the rate of five per cent per
annum above the Bank Rate.

19. • What is the penal interest that bank have to
pay to RBI if it defaults in maintenance of
required amount of SLR for more than one
day?
1. Bank rate + 3%
2. Bank rate + 4%
3. Bank rate + 5%
4. Bank rate + 6%
Answer: (3)
If a banking company fails to maintain the required amount of SLR, it shall be
liable to pay to RBI in respect of that default, the penal interest for that day at the
rate of 3 per cent per annum above the Bank Rate on the shortfall and if the
default continues on the next succeeding working day, the penal interest may be
increased to a rate of 5 per cent per annum above the Bank Rate for the
concerned days of default on the shortfall.

20. • Which out of the following is pledged to
RBI for borrowing under LAF?
1. Gold
2. G-Sec
3. Deposit
4. Shares
Answer: (2)
LAF is a facility extended by RBI to the scheduled
commercial banks and Primary Dealers to avail of liquidity
in case of requirement or park excess funds with RBI in
case of excess liquidity on an overnight basis against the
collateral of G-Secs including SDLs.

21. • Which among the following activities are
undertaken by investment banker?
1. Underwriting Securities
2. Providing Loans
3. Acts as CRA
4. All of the above
Answer: (1)
Investment banking is the division of a bank or
financial institution that serves governments,
corporations, and institutions by providing
underwriting

22. • Who regulates Mutual Fund business in
India?
1. RBI
2. IRDAI
3. SEBI
4. AMFI
Answer: (3)
Mutual funds in India are regulated and monitored by
the Securities and Exchange Board of India
(SEBI), which strives to protect the interests of
investors

23. • Who is the regulator of insurance
business in India?
1. RBI
2. IRDAI
3. SEBI
4. NABARD
Answer: (2)
Insurance Regulatory and Development Authority of
India (IRDAI), is a statutory body formed under an Act of
Parliament, i.e., Insurance Regulatory and Development
Authority Act, 1999 (IRDAI Act 1999) for overall supervision
and development of the Insurance sector in India.

24. • Which among the following is India’s first
listed Exchange?
1. BSE
2. NSE
3. KCX
4. MCX
Answer: (4)
The Multi Commodity Exchange of India Limited (MCX),
India’s first listed exchange, is a state-of-the-art, commodity
derivatives exchange that facilitates online trading of
commodity derivatives transactions, thereby providing a
platform for price discovery and risk management.

25. Which among the following is not the asset
in which banks can invest for
maintaining SLR?
1. Cash
2. Gold
3. Debentures
4. SLR securities
Answer: (3)
Statutory Liquidity Ratio or SLR is a minimum percentage of deposits
that a commercial bank has to maintain in the form of liquid cash, gold
or other securities. It is basically the reserve requirement that banks
are expected to keep before offering credit to customers

26. • What is the penal interest that scheduled
commercial banks have to pay to RBI in case
it fails to maintain the required amount of
SLR?
1. Bank Rate + 3%
2. Bank Rate + 5%
3. Base Rate + 3%
4. Base Rate + 5%
Answer: (2)
If a banking company fails to maintain the required amount of SLR, it
shall be liable to pay to RBI in respect of that default, the penal interest
for that day at the rate of three per cent per annum above the Bank
Rate on the shortfall and if the default continues on the next succeeding
working day, the penal interest may be increased to a rate of five per
cent per annum above the Bank Rate for the concerned days of default
on the shortfall.

27. • Which instrument is traded under Open
Marker Operations (OMO) in India?
1. Bonds
2. Stocks
3. Currency
4. Government securities
Answer: (4)
Open market operations refer to the selling and
purchasing of the treasury bills and government
securities by the central bank of any country, in
order to regulate money supply in the economy.

28. RBI has temporarily increased the borrowing limit for
scheduled banks under the marginal standing facility
(MSF) scheme from 2 per cent to ____ of their Net
Demand and Time Liabilities (NDTL) till March 2021.
1. 2.5%
2. 3%
3. 3.5%
4. 4%
Answer: (2)
The RBI, as a temporary measure, had increased the
borrowing limit for scheduled banks under the marginal
standing facility (MSF) scheme from 2 per cent to 3 per
cent of their Net Demand and Time Liabilities (NDTL) with
effect from March 27, 2020

29. • What is the minimum amount of money
that banks can borrow under MSF?
1. Rs 1 crore
2. Rs 2 crore
3. Rs 5 crore
4. Rs 10 crore
Answer: (1)
The minimum amount for which RBI
receives application is Rs.1 Crore, and
afterward in multiples of Rs.1 Crore.

30. • Who is the issuer of currency in India?
1. Ministry of finance
2. RBI
3. Department of Financial Services
4. SBI
Answer: (2)
The Reserve Bank of India is the nation’s sole note issuing
authority. Along with the Government of India, RBI is
responsible for the design, production and overall
management of the nation’s currency, with the goal of
ensuring an adequate supply of clean and genuine notes.

31. RBI has power to issue currency notes
upto to value of ____Rs?
1. Rs 1000
2. Rs 2000
3. Rs 5000
4. Rs 10000
Answer: (4)
RBI can issue any note of any denomination but NOT
exceeding Rs. 10,000. The notes denomination is notified by
Government and RBI acts accordingly. Under Section 22 of
the Reserve Bank of India Act, RBI has sole right to issue
currency notes of various denominations except one rupee
notes

32. • The Reserve Bank of India performs the
supervisory function under the guidance of the
_______.
1. Department of Economic Affairs
2. Ministry of Finance
3. Board for Financial Supervision (BFS)
4. IFMS
Answer; (3)
The Reserve Bank of India performs this function under the guidance of
the Board for Financial Supervision (BFS). The Board was constituted
in November 1994 as a committee of the Central Board of Directors of the
Reserve Bank of India. Primary objective of BFS is to undertake
consolidated supervision of the financial sector comprising commercial
banks, financial institutions and non-banking finance companies.

33. • Who administers the FEMA Act, 1999?
1. RBI
2. SEBI
3. AMFI
4. Directorate of Enforcement
Answer: (1)
RBI administers the FEMA and Directorate of
Enforcement (ED) is the authority for the
enforcement of FEMA

34. • Which among the following is not the
principle followed by RBI while investing
in foreign assets?
1. Safety
2. Liquidity
3. Return
4. High Risk
Answer: (4)
While investing in foreign assets no Central
Banking authority likes to get involved in high
risk assets.

35. Which report of RBI discloses forex
reserve position of RBI to the market?
1. Report on Trend and Progress of Banking
in India
2. Weekly Statistical Supplement
3. Basic Statistical Returns of Scheduled
Commercial Banks in India
4. Report on Currency and Finance
Answer: (2)
Weekly Statistical Supplement provides forex reserve
data and the changes in that week. It also talks about the
RBI Balance sheet, Reserve money, Money Supply, Bank
Credit etc

36. • Who acts as regulator and supervisor of
payments and settlement system in
country?
1. NPCI
2. SEBI
3. RBI
4. CCIL
Answer: (3)
The Payment and Settlement Systems Act of 2007
(PSS Act) gives the Reserve Bank oversight
authority, including regulation and supervision, for
the payment and settlement systems in the country

37. • Financial Stability Report is published on
____ basis?
1. Yearly
2. Monthly
3. Quarterly
4. Half-Yearly
Answer: (4)
The Financial Stability Reports, published on half-
yearly basis by Reserve Bank of India, after
approved by FSDC Sub-Committee. It is published
in January and July every year

38. • Who is the ex-officio chairperson of sub-
committee of FSDC?
1. RBI Governor
2. Finance Minister
3. Finance Secretary
4. Prime Minister
Answer: (1)
FSDC sub-committee is headed by the
Governor of RBI

39. A banking company cannot hold shares in any company
whether as pledgee, mortgagee or absolute owner of
an amount exceeding _____ of the paid-up capital of
that company or _____ of its own paid-up capital and
reserves, , whichever is less.
1. 20%, 25%
2. 20%, 30%
3. 25%, 25%
4. 30%, 30%
Answer: (4)
Sub-section (2) of the Section 19 of the Banking Regulation Act, 1949
provides that no banking company shall hold shares in any company,
whether as pledgee, mortgagee or absolute owner, of any amount
exceeding 30 per cent of the paid –up share capital of that company or
30 per cent of its own paid-up share capital and reserves

40. The aggregate exposure of a bank to the capital markets
in all forms (both fund based and non-fund based)
should not exceed __ of its net worth as on March 31
of the previous year
1. 30%
2. 40%
3. 50%
4. 60%
Answer: (4)
The aggregate exposure of a bank to the capital markets in all forms
(both fund based and non-fund based) should not exceed 40 per cent of
its net worth (as defined in paragraph 2.3.4), as on March 31 of the
previous year. Within this overall ceiling, the bank’s direct investment in
shares, convertible bonds / debentures, units of equity-oriented mutual
funds and all exposures to Venture Capital Funds (VCFs) [both registered
and unregistered] should not exceed 20 per cent of its net worth.