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PART I (1–20)
IT in Banking, Derivatives, Forex & Schemes
1. SWIFT stands for:
A. Society for World-over International Financial Transfers
B. Society for World-wide Interbank Financial Transfers
C. Society for World-wide Interbank Financial Telecommunication
D. Society for Worst International Financial Terrorism
Answer: C
Explanation: SWIFT stands for Society for World-wide Interbank Financial Telecommunication. It is a global messaging network used by banks worldwide for secure financial transactions and communications. Headquartered in Belgium, established in 1973.
2. WWW stands for:
A. World Wide Web
B. World Wise Web
C. Web World Wide
D. Wide World Web
Answer: A
Explanation: WWW stands for WORLD WIDE WEB — a system of interconnected hypertext documents accessed via the Internet. Invented by Tim Berners-Lee in 1989. The web operates over the Internet using HTTP/HTTPS protocols.
3. The term "Special Purpose Vehicle" (SPV) is used in the context of:
A. Factoring of receivables
B. Forfaiting of export receivables
C. Venture capital funding
D. Securitisation of receivables
Answer: D
Explanation: A Special Purpose Vehicle (SPV) is a legal entity created specifically for SECURITISATION of receivables. It is a bankruptcy-remote entity that holds the pool of assets (mortgages, loans) and issues securities (ABS/MBS) against them to investors.
4. Financial instruments whose prices are derived from the price of the underlying currency, interest rate, or stocks are known as:
A. Derivatives
B. Securitisation
C. Leasing
D. Factoring
Answer: A
Explanation: DERIVATIVES are financial instruments whose value is derived from an underlying asset (currency, interest rate, equity, commodity). Types include futures, options, forwards, and swaps. They are used for hedging and speculation.
5. To work out the productivity of a branch, business per employee comprises:
A. All types of business done by bank branches
B. Deposits of the branch
C. Deposits and advances
D. Advances of the branch
Answer: C
Explanation: Business per employee = (Total Deposits + Total Advances) / Number of employees. This is the standard measure of branch productivity. DEPOSITS AND ADVANCES together constitute the "business" of a branch.
6. Under a crop loan, farmers are generally allowed _____ months after harvest for marketing of produce and repayment:
A. 6 months
B. 5 months
C. 4 months
D. 2 months
Answer: D
Explanation: Under crop loans (Kisan Credit Card), farmers are generally allowed 2 MONTHS after harvest for marketing their produce and repaying bank dues. This is built into the crop loan repayment schedule based on the production cycle.
7. A bank is approached to retire an import bill received for collection from a foreign seller. Which rate will the bank apply?
A. Bills selling rate
B. Forward sale contract rate if already booked
C. Bill buying rate
D. Bills selling rate OR forward contract rate if already booked
Answer: D
Explanation: For retirement of an import bill, the bank will apply: (A) BILLS SELLING RATE if no forward contract is booked; OR (B) the FORWARD SALE CONTRACT RATE if a forward contract has already been booked by the customer. Both A and B apply depending on the situation.
8. What is an Indian Depository Receipt (IDR)?
A. A depository account with any Depository in India
B. A deposit account with a public sector bank
C. An instrument in the form of depository receipt created by an Indian depository against underlying equity shares of the issuing company
D. An instrument in the form of deposit receipt issued by Indian depositories
Answer: C
Explanation: An IDR is an instrument in the form of a DEPOSITORY RECEIPT created by an Indian depository (NSDL/CDSL) against the underlying equity shares of a foreign issuing company. It allows foreign companies to raise capital from Indian investors.
9. Indirect finance to micro and small enterprises (MSE) will NOT include credit to:
A. Persons assisting the decentralised sector in supply of inputs and marketing of outputs
B. Loans by banks to NBFCs for on-lending to MSEs
C. Loans granted to KVIC
D. None — all of these ARE eligible for indirect MSE finance
Answer: C
Explanation: Under PSL 2025 Directions, indirect finance to MSEs INCLUDES credit to persons assisting the decentralised sector (A) and loans to NBFCs for on-lending to MSEs (B). However, LOANS GRANTED TO KVIC are not covered under indirect MSE finance under the current PSL framework.
10. In November _____, banks were advised to raise Priority Sector advances to 33.33% by March 1979:
A. 1972
B. 1974
C. 1976
D. 1978
Answer: B
Explanation: In November 1974, RBI advised banks to raise their Priority Sector lending to 33.33% (one-third) of aggregate advances by March 1979. Based on recommendations of the Krishnaswamy Committee. The target was subsequently raised to 40% by 1985.
11. What is the maximum ceiling on FDI for investment in equity of public sector banks in India?
A. 20%
B. 25%
C. 40%
D. 49%
Answer: A
Explanation: FDI in Public Sector Banks (PSBs) is capped at 20% under the Government/FIPB route. This is distinct from private sector banks where FDI up to 49% is allowed under automatic route and up to 74% under government approval route.
12. The system using electronic means to collect payments from credit/debit card holders installed at retail outlets is called:
A. ATM
B. POS (Point of Sale)
C. CBT
D. CIP
Answer: B
Explanation: POS (Point of Sale) terminal is an electronic device installed at retailer locations that processes credit/debit card payments. Also called Electronic Data Capture (EDC) machine. India had over 8 crore POS terminals as of 2026 under RBI’s digitisation push.
13. The number of members of a Self Help Group for financing under SGSY scheme:
A. Normally 10-20 members
B. For disabled: 5-20 members
C. For hilly terrains: 5-20 members
D. All of the above
Answer: D
Explanation: Under SGSY (now restructured as DAY-NRLM), SHG membership norms are: Normally 10-20 members; For disabled persons: 5-20 members; For difficult/hilly terrains: 5-20 members. ALL options are correct for different categories.
14. For FCNR(B) deposits, the period for which deposits can be accepted is:
A. Minimum 6 months and maximum 12 months
B. Minimum 6 months and maximum 36 months
C. Minimum 12 months and maximum 24 months
D. Minimum 12 months and maximum 60 months
Answer: D
Explanation: FCNR(B) deposits have a MINIMUM period of 1 YEAR (12 months) and MAXIMUM period of 5 YEARS (60 months). There is no 6-month option. These are term deposits in foreign currency maintained by NRIs — principal and interest repatriation is freely allowed.
15. Under NULM (National Urban Livelihoods Mission), the quantum of margin money is:
A. 5% of the project cost
B. 5% of the loan amount
C. 7.5% of the project cost
D. 5-10% of the project cost
Answer: A
Explanation: Under NULM (now DAY-NULM), the margin money contribution is 5% OF THE PROJECT COST from the beneficiary. The loan covers the remaining 95% with interest subsidy support from the Government.
16. When a foreign currency for forward transactions is quoted at discount:
A. The currency is dearer in future
B. The currency is expected to be CHEAPER in future
C. The currency is at the same rate in future
D. The currency will be available with ease in future
Answer: B
Explanation: A currency quoted at DISCOUNT in the forward market means it is EXPECTED TO BE CHEAPER (depreciate) in the future relative to the current spot rate. PREMIUM means the currency is expected to appreciate. Forward rates reflect interest rate differential between two countries.
17. When a letter of credit is confirmed by a confirming bank, the request for confirmation should come from:
A. Negotiating bank
B. Exporter
C. Importer
D. Opening bank (Issuing bank)
Answer: D
Explanation: Under UCP 600 (Article 8), a confirmed LC requires the OPENING BANK (Issuing Bank) to authorise or request the confirming bank to add its confirmation. The confirming bank then adds its own independent payment undertaking to the LC.
18. When does a Commercial Paper (CP) become transferable?
A. Not transferable
B. After 15 days of issue
C. After 29 days of issue
D. Any time — CP is freely transferable from the date of issue
Answer: D
Explanation: Commercial Paper (CP) is a money market instrument that is FREELY TRANSFERABLE BY ENDORSEMENT AND DELIVERY from the date of issue. Unlike some instruments, there is no lock-in period — CPs can be transferred/traded in the secondary market at any point during their tenure.
19. When more than one bank allows credit facilities to one party under a formal arrangement, it is known as:
A. Participation
B. Consortium
C. Syndication
D. Multiple banking
Answer: B
Explanation: CONSORTIUM lending is a formal arrangement where multiple banks jointly finance one borrower with a defined share, common appraisal, joint documentation, and lead bank coordination. Multiple banking involves separate facilities without formal coordination. Syndication is for one-time, large capital market loans.
20. Conducting the affairs of a company or bank in a transparent manner for giving a fair deal to all stakeholders is called:
A. Implementation of prudential guidelines
B. Organisational restructuring
C. Corporate governance
D. Corporate restructuring
Answer: C
Explanation: CORPORATE GOVERNANCE refers to the system of rules, practices, and processes by which a company is directed and controlled, ensuring transparency and fair dealing with all stakeholders. The Cadbury Committee Report (1992) first formalized corporate governance standards.
PART II (21–40)
Priority Sector Lending, Housing & Financial Analysis
21. Under FEMA, the condition to constitute a person as "resident in India" includes being in India for 182 days during:
A. Stayed in India for 182 days
B. The previous year
C. The previous calendar year
D. The PREVIOUS FINANCIAL YEAR
Answer: D
Explanation: Under Section 2(v) of FEMA, 1999, a person is "resident in India" if he was in India for more than 182 days during the PRECEDING FINANCIAL YEAR (April to March). This is distinct from the Income Tax Act definition.
22. The approved mode for maintenance of Cash Reserve Ratio (CRR) is:
A. Balance in currency chest of currency chest bank branches
B. Cash balances maintained by various bank branches
C. Balances with other banks maintained by bank branches
D. Balances in a SPECIAL ACCOUNT WITH RBI opened for this purpose
Answer: D
Explanation: CRR must be maintained in the form of BALANCES IN A SPECIAL CURRENT ACCOUNT WITH RBI. Currency chest balances and cash held at branches do NOT count towards CRR maintenance. Only the balance in the account maintained with RBI is eligible.
23. Under Priority Sector, which is considered a "small farmer"?
A. Whose minimum 50% income is from agriculture
B. Whose irrigated land holding is less than 2.5 acres
C. Whose unirrigated land holding is less than 5 acres
D. Both B and C above
Answer: D
Explanation: Under PSL 2025 Directions, a Small Farmer has: irrigated land holding less than 2.5 ACRES; OR unirrigated land holding less than 5 ACRES. Both conditions (B and C) define a small farmer — they are alternative, not cumulative criteria.
24. Which combination of current ratio and debt-equity ratio is generally acceptable to a banker?
A. Current ratio 1.7:1 and Debt equity ratio 4:1
B. Current ratio 1.33:1 and Debt equity ratio 2:1
C. Current ratio 1.17:1 and Debt equity ratio 1.5:1
D. Current ratio 1.1:1 and Debt equity ratio 1:1
Answer: B
Explanation: Current ratio of 1.33:1 (Tandon Committee second method of lending) and Debt-Equity ratio of 2:1 is the GENERALLY ACCEPTABLE combination. Current ratio of 1.33 ensures adequate working capital. D/E ratio of 2:1 means total long-term debt is twice the equity, indicating manageable leverage.
25. Which of the following alterations is NOT a material alteration?
A. Converting order to bearer cheque
B. Cancelling crossing of a cheque
C. Changing payee’s name
D. Crossing an UNCROSSED cheque
Answer: D
Explanation: CROSSING AN UNCROSSED CHEQUE is NOT a material alteration under Section 125 of the NI Act — it is specifically authorised. Material alterations include: converting order to bearer, cancelling crossing, changing payee name, altering amount/date.
26. Fiscal deficit can be considered as:
A. Total income less Government borrowing
B. Total payments less total receipts
C. Total payments less capital receipts
D. Total expenditure less total receipts EXCLUDING BORROWINGS
Answer: D
Explanation: Fiscal Deficit = Total Expenditure − Total Receipts EXCLUDING BORROWINGS. It represents the amount the Government needs to borrow to meet its total expenditure. For 2025-26, the Union Budget targeted a fiscal deficit of 4.9% of GDP.
27. Which of the following CANNOT be categorized as a word processor?
A. MS Word
B. Word Perfect
C. Word Star
D. Windows Excel
Answer: D
Explanation: WINDOWS EXCEL (Microsoft Excel) is a SPREADSHEET application, not a word processor. Word processors include MS Word, WordPerfect, WordStar. Excel performs calculations, data analysis, and charting — not primarily text processing.
28. Which of the following is NOT considered as advance to agriculture under Priority Sector?
A. Loans to State Electricity Board for erection of high-power transmission line
B. Loans to Primary Agricultural Service Society
C. Subscription to bonds of NABARD for agriculture investment
D. Loans for bio gas plant
Answer: A
Explanation: Loans to State Electricity Board for erection of HIGH-POWER TRANSMISSION LINES are NOT classified as agriculture advances under PSL. Loans to PACS, NABARD bonds subscription, and bio-gas plant loans are eligible under PSL agriculture category.
29. Which of the following is one of the disclosures introduced by RBI for bank balance sheets?
A. Advances against selective credit control
B. Advances against selective items
C. Advances against software development
D. Advances to sensitive sectors
Answer: D
Explanation: RBI requires banks to disclose ADVANCES TO SENSITIVE SECTORS (capital market, real estate, commodities) in their balance sheet. This helps regulators and the public assess concentration risk in vulnerable sectors prone to price volatility.
30. Under SGSY scheme, which body identifies activities to be undertaken by beneficiaries in a block?
A. NABARD
B. Lead District Bank
C. SGSY Task Force
D. SGSY Committee
Answer: D
Explanation: The SGSY COMMITTEE (Block Level SGSY Committee) identifies key activities for SGSY beneficiaries in a block. SGSY has since been restructured into DAY-NRLM (Deendayal Antyodaya Yojana — National Rural Livelihoods Mission).
31. Which of the following is part of the hexadecimal number system?
A. A
B. A134
C. 1600
D. 1010
Answer: A
Explanation: In the HEXADECIMAL (Base-16) number system, digits are 0-9 and letters A-F (A=10, B=11, C=12, D=13, E=14, F=15). A single "A" is a valid hexadecimal digit representing the decimal value 10.
32. Which of the following terms best describes a computer program?
A. Hardware instruction
B. Input devices
C. Output device
D. Software
Answer: D
Explanation: A computer PROGRAM is best described as SOFTWARE. Software is a set of instructions (code) that tells the computer what to do. It is distinct from HARDWARE (physical components). Software types include system software (OS) and application software.
33. Which of the following will NOT be considered as an intangible asset?
A. Preliminary expenses
B. Pre-operative expenses
C. Debit balance of profit and loss account
D. None of the above
Answer: D
Explanation: All three — preliminary expenses, pre-operative expenses, and debit balance of P&L account — ARE classified as fictitious/intangible assets (Miscellaneous Expenditure) on the balance sheet. "None of the above" is correct as all are intangible assets.
34. Which of the following best describes the Internet?
A. A network of stand-alone computers
B. A network of servers
C. A network of networks
D. A network of world-wide computers
Answer: C
Explanation: The INTERNET is "A NETWORK OF NETWORKS" — a global system of interconnected computer networks using TCP/IP protocols. It connects millions of private, public, academic, business, and government networks worldwide.
35. Who among the following CANNOT issue a Commercial Paper (CP)?
A. Companies
B. Financial Institutions
C. Primary Dealers
D. Commercial Banks
Answer: D
Explanation: COMMERCIAL BANKS cannot issue Commercial Paper (CP). Under RBI guidelines, CPs can be issued by companies, primary dealers, and all-India financial institutions (AIFIs) with investment-grade ratings. Banks raise short-term funds through CDs (Certificates of Deposit), not CPs.
36. Working capital turnover ratio is 6, current ratio 2:1, current liabilities ₹10 lakh, net profit to sales 5%. What is the net profit?
A. ₹10 lakh
B. ₹8 lakh
C. ₹7 lakh
D. ₹6 lakh
Answer: D
Explanation: Current Assets = 2 × ₹10L = ₹20L. Sales = WCT Ratio × Current Assets = 6 × ₹20L = ₹120L. Net Profit = 5% × ₹120L = ₹6 lakh.
37. X has a joint "former or survivor" account XY with wife Y. X has a personal overdraft not being paid. Can the bank exercise right of set-off?
A. Not possible in joint accounts
B. Possible as the account is "former or survivor" — X is the primary operator
C. Possible only with consent of Y
D. Possible as in joint accounts this can be done
Answer: B
Explanation: In a FORMER OR SURVIVOR joint account, X (the former) is the primary/sole operator during his lifetime. The bank can exercise RIGHT OF SET-OFF against X’s share since X is the primary operator. However, banks must be cautious as Y’s share may not be attachable.
38. A bill purchased/negotiated under LC is not paid by the foreign buyer. After how much period will it get crystallised?
A. Immediately on expiry of transit period
B. Transit period plus 10 days
C. Transit period plus 25 days
D. Transit period plus 30 days
Answer: D
Explanation: As per RBI guidelines, an unpaid export bill negotiated under LC shall be CRYSTALLISED on TRANSIT PERIOD PLUS 30 DAYS (i.e., total of transit period and 30 additional days from the bill’s due date) — converted from foreign currency to INR at TT selling rate.
39. An exporter has shipped goods but has not presented the bill of lading to the bank. After how many days will it become stale?
A. If not presented within 7 days of shipment
B. If not negotiated within 10 banking days
C. If NOT PRESENTED WITHIN 21 DAYS of date of shipment — it will become stale
D. If not presented within 21 days — it becomes a claused bill of lading
Answer: C
Explanation: Under UCP 600 (Article 14c) and RBI guidelines, shipping documents must be presented to the negotiating bank within 21 DAYS of the date of shipment. If not presented within 21 days, the documents become "stale" and will not be accepted under the LC.
40. What is the limit for housing loans under PSL 2025 in metropolitan centres with population above 50 lakh?
A. ₹10 lakh
B. ₹35 lakh
C. ₹45 lakh
D. ₹50 lakh
Answer: D
Explanation: Under PSL 2025 Directions (effective April 1, 2025), housing loan limits are: Metro (population 50L+): up to ₹50 LAKH; Cities (10L–50L): up to ₹45L; Other centres (below 10L): up to ₹35L. The old limit of ₹25L has been superseded.
PART III (41–60)
Banking Operations, Foreign Exchange & Accounts
41. A loan application of ₹4 lakh under SSSBE scheme — maximum disposal period:
A. Two weeks
B. 8-9 weeks
C. 4 weeks
D. 3 weeks
Answer: C
Explanation: Under RBI guidelines for small loan applications, applications for amounts above ₹2 lakh (such as ₹4 lakh under SSSBE scheme) should be disposed of within 4 WEEKS. Smaller amounts: up to ₹25,000 = 2 weeks; ₹25,000–₹2 lakh = 3 weeks; above ₹2 lakh = 4 weeks.
42. One of the joint trustees has died. In such circumstances the bank should:
A. Allow the account to be operated upon by surviving trustees
B. NOT permit operations unless specifically mentioned in the trust deed
C. Allow surviving trustees to operate the account if bank permits
D. Give all powers automatically to surviving trustee
Answer: B
Explanation: In a TRUST ACCOUNT, surviving trustees CANNOT automatically operate the account after one trustee dies unless the TRUST DEED specifically provides for this. The bank should examine the trust deed and act as per its provisions.
43. An export bill drawn in Pound Sterling presented for negotiation under LC — which rate will the bank apply?
A. Bills buying rate
B. TT buying rate
C. Bills selling rate
D. TT selling rate
Answer: A
Explanation: For EXPORT BILL NEGOTIATION under LC, the bank applies the BILLS BUYING RATE. This rate is lower than TT buying rate as it includes exchange margin plus cost for the transit period. TT buying rate applies for direct inward remittances/telegraphic transfers.
44. The full export value of goods shall be received through an AD Bank in which manner?
A. Bank draft, pay order, banker’s or personal cheques
B. Foreign currency notes/FC travellers’ cheques from the buyer during his visit to India
C. Payment out of funds held in FCNR/NRE account maintained by the buyer
D. International Credit Cards of the buyer
E. All of the above
Answer: E
Explanation: Under FEMA/RBI guidelines, export proceeds can be received through ALL the mentioned modes: bank drafts/cheques; FC notes/TC from buyer visiting India; from FCNR/NRE accounts; and international credit cards. ALL are permitted modes of receiving export proceeds through AD Banks.
45. What is the limit for housing loans under PSL in metropolitan centres with population above 10 lakh? (Old guideline basis)
A. ₹10 lakh
B. ₹15 lakh
C. ₹20 lakh
D. ₹25 lakh
Answer: D
Explanation: Under the previous PSL guidelines (pre-2025), the housing loan limit for metro areas (population above 10 lakh) was ₹25 lakh. However, under PSL 2025 Directions (effective April 1, 2025), this has been REVISED UPWARD to ₹50 lakh for centres with population above 50 lakh and ₹45 lakh for centres with 10–50 lakh population.
46. What type of risk approach is currently implemented by banks for Credit and Operational Risk?
A. Standardised Approach (Credit) and Basic Indicator Approach (Operational Risk)
B. RBIA (Risk-Based Internal Audit)
C. Advanced RBIA
D. None of these
Answer: A
Explanation: Currently, Indian banks implement: STANDARDISED APPROACH for Credit Risk; and BASIC INDICATOR APPROACH or STANDARDISED APPROACH for Operational Risk. Under new Basel III Credit Risk (SA) Directions 2026 (effective April 1, 2027), an enhanced Standardised Approach replaces the current framework.
47. Regarding BLCSC — which statement is NOT TRUE?
A. Banks should include customers in BLCSC
B. A senior citizen should be included in the committee
C. The BLCSC should give quarterly reports to Standing Committee on Customer Service
D. The BLCSC should meet at least once a month
E. None of the above — all statements are correct
Answer: E
Explanation: ALL statements about BLCSC are TRUE under RBI guidelines. Customers must be included; a senior citizen must be included; quarterly reports to Standing Committee; meeting at least once a month. Therefore "None of the above" (E) is correct.
48. Financial instruments that draw their value from some underlying financial instrument or contract are called:
A. Participatory notes
B. Derivatives
C. Options
D. Futures
Answer: B
Explanation: DERIVATIVES are financial instruments whose value is DERIVED from an underlying asset or reference (interest rates, currency, equity, commodity, credit). Options and Futures are TYPES of derivatives. Participatory notes (P-Notes) are instruments issued by FPIs to unregistered overseas investors.
49. Which of the following CANNOT be appointed as a nominee by an NRI account holder residing in UK?
A. His old mother of 98 years, residing in India
B. His minor niece, aged 3 years, living in Canada
C. His son living in USA for the last 30 years
D. HUF (Hindu Undivided Family) in which he is a Karta
Answer: D
Explanation: An HUF CANNOT be appointed as a nominee for a bank account. Under RBI guidelines, only INDIVIDUALS can be nominees — not juridical persons, HUFs, trusts, companies, or societies. Any individual (regardless of age, nationality, or residence) can be a nominee.
50. Which statement is INCORRECT about Basic Savings Bank Deposit Account/Small Accounts?
A. Total credits should not exceed ₹1 lakh/year; maximum balance ₹50,000 at any time
B. Total debits will not exceed ₹10,000 in a month
C. Foreign remittances CANNOT be credited to Small Accounts without completing normal KYC
D. Small accounts are valid for 12 months initially, extendable by another 12 months
E. None of these
Answer: C
Explanation: Option C is INCORRECT. Under RBI’s revised KYC/Small Account guidelines, FOREIGN REMITTANCES CAN be credited to Small Accounts even without full KYC, subject to the annual credit ceiling of ₹1 lakh. The restriction is only on total credits/debits limits, not on the mode of credit.
51. A bank to operate has to obtain a license from RBI. Such license is issued as per the provisions of:
A. Reserve Bank of India Act
B. Banking Regulation Act
C. Constitution
D. Both A and B
Answer: B
Explanation: A bank requires a license under Section 22 of the BANKING REGULATION ACT, 1949 to carry on banking business in India. The RBI Act deals with the constitution and functions of RBI itself, not with licensing of banks.
52. Ways and Means Advances are provided by:
A. Nationalised Banks
B. Public Sector Banks
C. Regional Rural Banks
D. RBI (None of these)
Answer: D
Explanation: Ways and Means Advances (WMA) are SHORT-TERM CREDIT FACILITIES provided by the RESERVE BANK OF INDIA to Central and State Governments to bridge the gap between revenue and expenditure. Introduced under Section 17(5) of the RBI Act.
53. Identify the power NOT pertaining to Reserve Bank of India:
A. Power to license
B. Power regarding audit of banks
C. Power to impose penalties
D. None of these — all powers are with RBI
Answer: D
Explanation: ALL three powers — licensing (Section 22 BR Act), audit/inspection (Section 35 BR Act), and imposition of penalties (Section 46 BR Act) — are vested in RBI. Therefore "None of these" is the correct answer.
54. A co-operative bank registered under DICGC Act is facing winding up. Who has the power to order its winding up?
A. Reserve Bank of India
B. State Government
C. Registrar of Co-operatives
D. None of them
Answer: A
Explanation: Under Section 13A of the DICGC Act and Section 44A of the Banking Regulation Act, the RESERVE BANK OF INDIA has the power to order the winding up of a co-operative bank registered under the DICGC Act.
55. RBI can issue ₹1000 denomination currency notes as per the provisions of:
A. Reserve Bank of India Act
B. Banking Regulation Act
C. Both A and B
D. Constitution
Answer: A
Explanation: RBI issues currency notes under Section 22 of the RESERVE BANK OF INDIA ACT, 1934. Under Section 24, RBI can issue notes of any denomination not exceeding ₹10,000. The Banking Regulation Act does not deal with currency issuance.
56. Co-operative Banks come under the control of RBI by virtue of:
A. Reserve Bank of India Act
B. Banking Laws (Application to Co-operative Societies) Act, 1965
C. Banking Regulation Act
D. All of the above
Answer: D
Explanation: Co-operative banks come under RBI’s jurisdiction through ALL THREE: (1) RBI Act — monetary policy; (2) Banking Laws (Application to Co-operative Societies) Act, 1965 — extended BR Act provisions to co-operative banks; (3) Banking Regulation Act — banking regulation and supervision.
57. In respect of terms and conditions of service of its workmen and opening/closing of branch premises, a bank is answerable to:
A. Its Corporate Office
B. Reserve Bank of India
C. Labour Authorities
D. Its Head Office
Answer: A
Explanation: For service conditions of employees (wages, service rules, opening/closing timings), banks are primarily answerable to their CORPORATE OFFICE/MANAGEMENT and labour authorities. Internal HR/service matters are controlled by the bank’s corporate/management hierarchy, subject to applicable labour laws.
58. A Co-operative Bank having branches in more than one State is called:
A. Multi Purpose Co-operative Bank
B. Multi State Co-operative Bank
C. Multi Dimensional Co-operative Bank
D. Multi Co-operative Bank
Answer: B
Explanation: A co-operative bank having branches in more than one state is called a MULTI STATE CO-OPERATIVE BANK. Such banks are governed by the Multi State Co-operative Societies Act, 2002 and are regulated by the Central Registrar of Co-operative Societies and RBI.
59. MSMED Act 2006 was notified on:
A. April 16, 2006
B. January 16, 2006
C. June 16, 2006
D. October 2, 2006
Answer: D
Explanation: The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 was notified on OCTOBER 2, 2006. The Act was significantly amended in 2020 to revise the definition of MSMEs based on investment and turnover criteria.
60. Identify the ODD one:
A. State Bank of India
B. Axis Bank
C. Reserve Bank of India
D. Postal Bank
Answer: D
Explanation: POSTAL BANK (India Post Payments Bank) is the ODD ONE as it is a PAYMENTS BANK — not a full-service commercial bank. SBI is a public sector bank, Axis Bank is a private sector bank, and RBI is the Central Bank. India Post Payments Bank was incorporated in 2018 and cannot extend loans or credit cards.
PART IV (61–80)
Banking Regulation, RBI Powers & Capital
61. Which of the following is NOT appropriate?
A. A commercial bank is prohibited from selling insurance products
B. An urban co-operative bank can sell mutual fund products
C. A private sector bank can issue a credit card
D. A nationalised bank is permitted to accept articles under safe custody
Answer: A
Explanation: Option A is NOT APPROPRIATE. Commercial banks are NOT prohibited from selling insurance products. Under bancassurance guidelines, banks can act as corporate agents for insurance companies. They can sell both life and non-life insurance products as a fee-based income activity.
62. Accepting deposit receipts under safe custody is _____ business of a commercial bank:
A. True — it is secondary/ancillary business
B. Incorrect description
C. False — it is not a banking business
D. In fact it is primary business
Answer: A
Explanation: Accepting articles/deposit receipts under SAFE CUSTODY is a SECONDARY (ancillary) business of a commercial bank, permitted under Section 6(1) of the Banking Regulation Act. The PRIMARY business is accepting deposits and granting loans.
63. The main liability of a commercial bank is:
A. Term Deposit
B. Term Loan
C. Both Term Deposit and Term Loan
D. None of these
Answer: A
Explanation: TERM DEPOSITS (Fixed Deposits, Recurring Deposits, etc.) are the MAIN LIABILITY of a commercial bank — they represent money owed to depositors. Term Loans are ASSETS (advances). A bank’s balance sheet: Assets = Loans + Investments; Liabilities = Deposits + Borrowings + Capital.
64. Banking companies operating only in a limited geographical area are:
A. State Co-operative Banks
B. District Co-operative Banks
C. Foreign Banks
D. Local Area Banks (LABs)
Answer: D
Explanation: LOCAL AREA BANKS (LABs) are banking companies that operate in a limited geographical area (spanning 2-3 contiguous districts). They were established in 1996 to provide financial services to rural and semi-urban areas. Currently, only 2 LABs operate in India (as of 2026).
65. RBI rejected ABC company’s application for a banking license. Then ABC company:
A. Is ineligible to start banking business
B. Can carry on banking business after 6 months
C. Is not ineligible to start banking business
D. None of these
Answer: A
Explanation: Under Section 22(3) of the Banking Regulation Act, if RBI REJECTS a license application, the company is INELIGIBLE to commence or carry on banking business. The company may appeal to the Central Government under Section 22(4) within 30 days of the rejection order.
66. A banking company whose license is cancelled can appeal within 30 days:
A. True — to Banking Ombudsman
B. Not Banking Ombudsman — but RBI Governor
C. FALSE — NOT to Banking Ombudsman
D. Neither Banking Ombudsman nor RBI Governor but RBI Board
Answer: C
Explanation: The statement is FALSE. Under Section 22(4) of the Banking Regulation Act, an appeal against cancellation of license is made to the CENTRAL GOVERNMENT (not Banking Ombudsman) within 30 days. The Banking Ombudsman handles customer complaints, not license cancellations.
67. Banks should submit their request for new branches, administrative offices and ATMs for consideration of RBI:
A. As and when needed
B. Once in a year
C. Once in every six months
D. Once in a quarter
Answer: B
Explanation: RBI requires banks to submit their branch expansion proposals (Annual Branch Expansion Plan — ABEP) ONCE A YEAR. Banks submit their annual plan indicating proposed opening of new branches, ATMs, and administrative offices for RBI’s consideration and approval.
68. Who cannot approach RBI directly for branch licensing?
A. Regional Rural Banks
B. Urban Co-operative Banks
C. Nationalised Banks
D. Private Sector Banks
Answer: A
Explanation: REGIONAL RURAL BANKS (RRBs) CANNOT directly approach RBI for branch licensing. They must channel their branch expansion requests through the SPONSOR BANK and NABARD, which then forwards to RBI. RRBs are governed under the Regional Rural Banks Act, 1976.
69. A foreign bank which has a branch in Kolkata has to:
A. Deposit and keep deposited with RBI a sum of ₹20 lakhs
B. Deposit 20% of profit each year with RBI
C. Both A and B above
D. Deposit a token amount as stipulated by RBI
Answer: C
Explanation: Under Sections 11(2) and 11(3) of the Banking Regulation Act, a FOREIGN BANK with branches in India must: (A) Deposit ₹20 lakhs with RBI as statutory deposit; AND (B) Transfer 20% of its annual profit to a statutory reserve in India. BOTH requirements apply.
70. A commercial bank (existing) with places of business in both Mumbai and Kolkata — minimum paid-up capital and reserves required:
A. ₹5 lakhs
B. ₹10 lakhs
C. Any amount
D. ₹10 crores
Answer: B
Explanation: Under Section 11 of the Banking Regulation Act, the minimum paid-up capital and reserves for an existing commercial bank with places of business in more than one State is ₹10 LAKHS. For new bank licenses, RBI now requires much higher capital (₹200 crore for universal banks).
71. The Act that stipulates subscribed capital of a banking company shall not be less than half of authorized capital, and paid-up capital not less than half of subscribed capital:
A. Banking Regulation Act
B. Companies Act
C. Reserve Bank of India Act
D. All the above
Answer: A
Explanation: Section 12 of the BANKING REGULATION ACT, 1949 stipulates: Subscribed capital ≥ 50% of Authorized capital; Paid-up capital ≥ 50% of Subscribed capital. This prevents banking companies from having large authorized capital with minimal actual paid-up capital.
72. When a bank receives shares for transfer exceeding the specified percentage to one party, the bank shall not transfer the shares:
A. Without intimating RBI
B. Without receiving RBI’s ACKNOWLEDGMENT
C. Without intimating Finance Ministry
D. Without intimating Company Law Board
Answer: B
Explanation: Under Section 12B of the Banking Regulation Act, when shares for transfer exceed 5% of paid-up capital to a single party, the bank shall not register the transfer WITHOUT RECEIVING RBI’s ACKNOWLEDGMENT. Mere intimation is not enough.
73. Banks can raise their capital in the form of:
A. Innovative debt instruments
B. Perpetual instruments
C. Perpetual non-cumulative preference shares
D. Any one of the above
Answer: D
Explanation: Under Basel III Capital framework, banks can raise Additional Tier 1 (AT1) capital through: (A) Innovative debt instruments (AT1 bonds); (B) Perpetual instruments; (C) Perpetual Non-Cumulative Preference Shares (PNCPS). ANY of the above forms can be used subject to RBI guidelines.
74. Holding of beneficial interest by an individual/spouse/minor child exceeding ₹5 lakhs or 10% of paid-up capital amounts to:
A. Substantial interest
B. Beneficial interest
C. Vested interest
D. Associated interest
Answer: A
Explanation: Under Section 5(ne) of the Banking Regulation Act, "SUBSTANTIAL INTEREST" means a beneficial interest exceeding ₹5 lakhs or 10% of the paid-up capital of a company, held by an individual, his spouse, and minor children singly or together.
75. A director of a banking company shall not hold office continuously for more than:
A. 10 years (True)
B. False — no restriction
C. Not 10 years but 8 years
D. Neither 10 years nor 8 years but 7 years
Answer: C
Explanation: Under Section 10B of the Banking Regulation Act, a director of a banking company (other than Chairman/MD/CEO) shall not hold office continuously for more than 8 YEARS. After 8 years, there must be a cooling-off period of at least 3 years before reappointment to the same bank’s board.
76. In the absence of a Chairman, the management of the whole affairs of a banking company shall be entrusted to:
A. A Managing Director
B. A committee of Top Management representatives
C. An Executive Director
D. None of these
Answer: A
Explanation: Under Section 10B(6) of the Banking Regulation Act, in the absence of a Whole-Time Chairman, the management of the whole of the affairs of the banking company shall be entrusted to a MANAGING DIRECTOR (MD).
77. RBI may appoint an additional director in the interest of:
A. Public
B. Banking policy
C. Depositors of the company
D. All of these
Answer: D
Explanation: Under Section 36AB of the Banking Regulation Act, RBI may appoint additional directors in the PUBLIC INTEREST, in the interest of BANKING POLICY, or in the interest of the DEPOSITORS. ALL THREE are valid grounds.
78. Which is NOT a permitted business of banks under the Banking Regulation Act?
A. Accepting term deposits
B. Issuing travellers’ cheques
C. Selling of coins
D. Making available safe deposit lockers
Answer: C
Explanation: SELLING OF COINS is NOT listed as a permitted business under Section 6 of the Banking Regulation Act. Banks may handle currency but the sale of coins as a separate business is not a specified banking activity. Accepting deposits, travellers’ cheques, and safe deposit lockers ARE listed in Section 6.
79. When the Board of a banking company is reconstituted, directors will NOT be removed by:
A. Lots
B. Majority decision
C. Both A and B
D. None
Answer: A
Explanation: Under Section 36A(1) of the Banking Regulation Act, for reconstitution of the Board, directors shall NOT be removed by LOTS. The process is prescribed by RBI.
80. Shareholders of a banking company are entitled to dividends:
A. True — before all capitalised expenses are written off
B. False
C. AFTER (not before) all capitalised expenses are written off
D. No connection between capitalised expenses and declaring dividends
Answer: C
Explanation: Under Section 15 of the Banking Regulation Act, no banking company shall pay dividends on its shares until all capitalised expenses (preliminary expenses, share selling commission, brokerage, etc.) have been completely written off. Dividends can be paid AFTER writing off such expenses.
PART V (81–100)
KYC, AML, PMLA & Customer Service Guidelines
81. If the bank’s Board is not properly constituted, who reconstitutes the Board?
A. Central Government (Appropriate)
B. In fact RBI is EMPOWERED to reconstitute
C. Not Appropriate
D. Neither Central Government nor RBI but Banking Ombudsman
Answer: B
Explanation: Under Sections 36AB and 36ACA of the Banking Regulation Act, RBI is EMPOWERED to reconstitute the Board of a banking company. This power was strengthened by the Banking Regulation (Amendment) Act, 2020 to give RBI more oversight over co-operative banks as well.
82. Any office, sub-office, pay-office, sub-pay office and any place at which deposits are received, cheques encashed or moneys lent is known as:
A. Place of Banking
B. Place of Business
C. Branch of a Bank
D. Place of a Bank
Answer: B
Explanation: Under Section 5(b) of the Banking Regulation Act, such a place is defined as a "PLACE OF BUSINESS." This broad definition covers all locations where core banking activities are conducted — including ATMs, Business Correspondents, and all types of banking outlets.
83. A Senior Management Officer is to be appointed as Principal Officer by each bank as per RBI directives under:
A. Ombudsman Scheme
B. KYC Directives (PMLA compliance)
C. Clean Note Policy
D. Banking Supervision
E. All the above
Answer: B
Explanation: Each bank must appoint a PRINCIPAL OFFICER under KYC/PMLA DIRECTIVES — specifically under PMLA, 2002 and RBI’s Master Direction on KYC. This officer is responsible for reporting suspicious transactions (STRs/CTRs) to the Financial Intelligence Unit (FIU-IND).
84. Other than the Governor and Deputy Governors of RBI, the other directors are:
A. Appointed
B. Nominated
C. Selected
D. Elected
Answer: B
Explanation: Under Section 8 of the RBI Act, the RBI’s Central Board consists of the Governor, Deputy Governors, and other directors who are NOMINATED by the Central Government. The Government nominates directors from different sectors (officials, industry, economists, etc.).
85. As per Banking Regulation Act provisions, the Whole-time Chairman or Managing Director of a banking company must hold qualification shares of minimum 50:
A. It is not 50 but 100
B. They NEED NOT hold any qualification shares
C. They need qualification shares of 10 as per Banking Regulation Act
D. None of these
Answer: B
Explanation: Under Section 10B(3)(ii) of the Banking Regulation Act, the Whole-time Chairman or Managing Director of a banking company is NOT REQUIRED TO HOLD ANY QUALIFICATION SHARES, unlike other directors. This allows professional bankers to lead banks without being shareholders.
86. The Regional Rural Banks are constituted under the:
A. Regional Rural Banks Act, 1976
B. Reserve Bank of India Act
C. Banking Regulation Act
D. Regional Rural Banks Act, 1975
Answer: A
Explanation: Regional Rural Banks (RRBs) are constituted under the REGIONAL RURAL BANKS ACT, 1976. RRBs were established in 1975 through an Ordinance. The RRB Act was passed in 1976. RRBs have tripartite ownership: Central Government (50%), State Government (15%), Sponsor Bank (35%).
87. Which statement is INCORRECT about banking business?
A. Carry on and transact guarantee and indemnity business
B. Buying or selling or bartering of goods
C. Acquire, construct and maintain any building for its own purpose
D. Collecting and transmitting of money and securities
Answer: B
Explanation: BUYING OR SELLING OR BARTERING OF GOODS (as a trading activity) is NOT a permitted business under Section 6(1) of the Banking Regulation Act. Banks can accept goods as security/collateral but cannot trade in goods. All other options ARE permitted.
88. The first major study by the Cadbury Committee (1992) led to the introduction of:
A. Corporate Culture
B. Corporate Governance
C. Corporate Social Responsibility
D. Corporate Sector
Answer: B
Explanation: The CADBURY COMMITTEE report on "Financial Aspects of Corporate Governance" (December 1992, UK) introduced CORPORATE GOVERNANCE as a formal discipline. It recommended codes of best practice for boards of directors and set the foundation for global corporate governance standards.
89. Identify the Public Sector Banks from the list:
A. Central Bank of India
B. State Bank of Mysore (merged with SBI in 2017)
C. United Bank of India (merged with PNB in 2020)
D. All of the above were Public Sector Banks
Answer: D
Explanation: ALL THREE were Public Sector Banks: (A) Central Bank of India — still a PSB; (B) State Bank of Mysore — was a PSB (SBI Associate), MERGED WITH SBI in April 2017; (C) United Bank of India — was a PSB, MERGED WITH PNB in April 2020.
90. A Private Sector Bank is governed by:
A. Companies Act
B. Banking Regulation Act
C. Reserve Bank of India
D. Companies Act + Banking Regulation Act + RBI regulation
Answer: D
Explanation: A Private Sector Bank (e.g., HDFC Bank, ICICI Bank, Axis Bank) is governed by: (A) COMPANIES ACT, 2013 (for corporate structure); (B) BANKING REGULATION ACT, 1949 (for banking operations); (C) RESERVE BANK OF INDIA (for monetary policy, licensing, and regulatory supervision). ALL THREE apply.
91. Which of the following is NOT a key element of KYC policy as per RBI directives?
A. Customer Acceptance Policy
B. Customer Identification Procedure
C. Risk Management
D. Monitoring of Transactions
E. None of the above — all are key elements
Answer: E
Explanation: ALL FOUR are key elements of KYC policy as per RBI’s Master Direction on KYC: Customer Acceptance Policy; Customer Identification Procedure (CIP); Risk Management; Monitoring of Transactions. "None of the above" (E) is correct because all four listed options ARE key elements.
92. Which statement is NOT TRUE about the introducer for opening a bank account?
A. A staff member can also introduce
B. Introducer MUST COME TO THE BANK for signing the AOF for introduction
C. Introducer should have a satisfactorily operated account not having small and marginal balances
D. Account of introducer should be opened at least 6 months before he introduces an account
Answer: B
Explanation: Option B is NOT TRUE. The introducer is NOT required to physically come to the bank to sign the AOF. Under current KYC guidelines, introduction can be in writing. Moreover, under revised RBI guidelines, the entire introduction system has been largely replaced by OVD-based (Officially Valid Document) KYC.
93. A Senior Management Officer is to be appointed as Principal Officer by each bank as per RBI directives under:
A. Ombudsman Scheme
B. KYC/PMLA Directives
C. Clean Note Policy
D. Banking Supervision
E. All the above
Answer: B
Explanation: The PRINCIPAL OFFICER appointment is mandated under KYC/PMLA DIRECTIVES (RBI Master Direction on KYC, 2016 as amended). Under PMLA, banks must designate a Principal Officer to ensure compliance with AML/CFT obligations and to report suspicious transactions to FIU-IND.
94. Which is NOT TRUE about independent confirmation of customer’s address?
A. Address can be verified from Ration card, Driving license, PAN Card etc.
B. Serial number of the document used for verification should be noted on AOF
C. If a customer cannot produce documents, his account CANNOT be opened at all
D. Address can also be verified by deputing an employee
E. None of the above — all statements are correct
Answer: E
Explanation: ALL statements (A-D) are TRUE under RBI KYC guidelines: Addresses can be verified from OVDs; document number should be recorded; if no OVD is available, SMALL ACCOUNTS can be opened with simplified KYC (not "cannot open at all"); address verification by employee deputation is allowed. Therefore "None of the above" (E) is correct.
95. In case of accounts of minors operated by their guardians, whose photo should be obtained?
A. Minor’s photo
B. GUARDIAN’S photo
C. Both minor’s and guardian’s photos
D. No photo required
E. None of the above
Answer: B
Explanation: Under RBI KYC guidelines, for bank accounts of MINORS operated by their guardians, the GUARDIAN’S PHOTO is required (not the minor’s). The guardian is the accountholder/operator until the minor becomes major. Upon attaining majority, fresh KYC including the minor’s photo must be obtained.
96. Regarding issue of fresh cheque book, which of the following RBI guidelines is NOT TRUE?
A. Fresh cheque book can be issued to 3rd party only on production of duly signed requisition slip
B. If cheque book is issued against request letter, drawer should come personally to receive it
C. Cheque book against request letter can be issued to 3rd party if signatures are attested by drawer and bank sends confirmation letter
D. Cheque book against requisition letter should be sent to drawer under registered post
E. Loose cheques can be issued to the drawer only and on production of pass book
Answer: C
Explanation: Option C is NOT TRUE. Cheque books CANNOT be issued to a third party against a request letter merely on the basis of attested signatures with a confirmation letter. This process is not endorsed by RBI as it creates risk of fraud. Cheque books should be issued to the drawer directly or sent under registered post.
97. Transactions in newly operated accounts are to be kept under close watch for at least:
A. 3 Months (90 days)
B. 6 Months
C. 90 days (same as 3 months)
D. Fortnight
E. 180 days
Answer: A
Explanation: Under RBI’s KYC/AML guidelines, transactions in newly opened accounts must be closely monitored for at least 3 MONTHS (90 days) from the date of account opening. This initial monitoring period helps detect suspicious activity, round-tripping of funds, or account misuse early.
98. Under Section 12 of PMLA 2002, banks must keep records of customer relationships and transactions for at least:
A. 5 years
B. 4 years
C. 8 years
D. 10 years
E. None of the above
Answer: D
Explanation: KEY UPDATE: Under Section 12 of the Prevention of Money Laundering Act (PMLA), 2002, as AMENDED by Finance Act 2023, banks must maintain records for at least 10 YEARS (increased from 5 years). This includes account files, business correspondence, and transaction documents.
99. Regarding introduction given by staff members, RBI has advised banks that:
A. Introduction from staff members should not be accepted
B. Introduction of only confirmed staff members should be accepted
C. Only persons ranked officer and above can introduce
D. Introduction from staff members should be DISCOURAGED
E. All the above
Answer: D
Explanation: RBI has advised that introduction from staff members should be DISCOURAGED (not completely prohibited). Banks should rely on OVD-based KYC. The spirit of the guideline is to move away from the introduction system entirely to document-based verification.
100. Mr. Mohinder Singh opened SB account on 24.04.09, requested cheque book on 27.04.09 (issued same day). A cheque dated 17.04.09 is presented in clearing. The bank should:
A. Return the cheque as it is issued before the date of account opening
B. PAY if otherwise in order
C. Close the account for unethical practices
D. Return with remarks "get the date corrected"
Answer: B
Explanation: The bank should PAY the cheque if it is otherwise in order. The cheque dated 17.04.09 was issued from the cheque book given on 27.04.09 for an account opened on 24.04.09. The cheque being ante-dated (dated earlier than issue date) does not make it invalid per se. If the cheque is otherwise in order (signature matches, sufficient balance), it should be paid.
Disclaimer: This article is for educational purposes only. Always refer to official RBI website at www.rbi.org.in for the most current guidelines.