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Economy Practice Set 07

Authored practice, not a verbatim PYQ. 25 CAPF-level economy MCQs (hard) with answer key and one-line explanations, span across money, banking, the RBI, monetary policy and the financial sector.

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PaperPaper ISubjectEconomy

Authored practice, not a verbatim PYQ. Twenty-five single-correct MCQs in CAPF Paper I objective style, weighted towards money and banking, the Reserve Bank of India, monetary policy and financial-sector reforms. Attempt closed-book, then check the key. For year-sensitive figures, verify the latest.

Questions

Q1The Reserve Bank of India was established in:
  1. A1935
  2. B1947
  3. C1950
  4. D1969
Q2The RBI is the "lender of last resort", meaning it:
  1. ALends to households directly
  2. BProvides emergency funds to banks facing a liquidity crisis
  3. CIssues passports
  4. DCollects income tax
Q3The rate at which the RBI lends to commercial banks against government securities for the short term is the:
  1. ARepo rate
  2. BBank rate only
  3. CStatutory liquidity ratio
  4. DCash reserve ratio
Q4The "Reverse Repo Rate" is the rate at which the RBI:
  1. ALends to banks
  2. BBorrows from banks (absorbs liquidity)
  3. CPrints currency
  4. DIssues bonds abroad
Q5The "Cash Reserve Ratio" (CRR) is the proportion of deposits that banks must:
  1. ALend to agriculture
  2. BKeep as reserves with the RBI
  3. CInvest in shares
  4. DPay as tax
Q6The "Statutory Liquidity Ratio" (SLR) requires banks to maintain a minimum proportion of deposits in:
  1. ACash with the RBI
  2. BLiquid assets such as government securities, gold and cash
  3. CForeign currency only
  4. DReal estate
Q7Monetary policy in India is decided by the:
  1. AFinance Ministry alone
  2. BMonetary Policy Committee (MPC)
  3. CSEBI
  4. DNITI Aayog
Q8The primary objective assigned to the MPC under the amended RBI framework is to maintain:
  1. AFull employment only
  2. BPrice stability around an inflation target while keeping growth in mind
  3. CThe exchange rate at a fixed level
  4. DA balanced budget
Q9"Open Market Operations" by the RBI involve:
  1. ABuying and selling of government securities to manage liquidity
  2. BAuctioning spectrum
  3. CSelling public sector firms
  4. DSetting income tax rates
Q10The currency notes in India (other than the one rupee note) are issued by the:
  1. AMinistry of Finance
  2. BReserve Bank of India
  3. CState Bank of India
  4. DMints alone
Q11The "one rupee note" and coins are issued by the:
  1. ARBI
  2. BGovernment of India (Ministry of Finance)
  3. CSEBI
  4. DCommercial banks
Q12Bank nationalisation in India first took place on a large scale in:
  1. A1949
  2. B1969 (14 major banks)
  3. C1991
  4. D2016
Q13A "Non-Performing Asset" (NPA) is a loan on which:
  1. AInterest is paid in advance
  2. BPrincipal or interest has remained overdue beyond a specified period
  3. CThe bank earns extra profit
  4. DThe borrower has prepaid fully
Q14The Insolvency and Bankruptcy Code (IBC), 2016, was enacted mainly to:
  1. ARegulate the stock market
  2. BProvide a time-bound process for resolving insolvency and bad loans
  3. CSet income tax rates
  4. DManage foreign exchange
Q15"Priority Sector Lending" requires banks to lend a fixed share to sectors such as:
  1. ALarge corporations only
  2. BAgriculture, small enterprises and weaker sections
  3. CLuxury goods
  4. DForeign firms
Q16"Financial inclusion" refers to:
  1. AExcluding the poor from banking
  2. BEnsuring access to affordable financial services for all, including the unbanked
  3. COnly stock market participation
  4. DReducing the number of banks
Q17The Pradhan Mantri Jan Dhan Yojana aimed to advance:
  1. ADefence production
  2. BFinancial inclusion through no-frills bank accounts
  3. CHighway construction
  4. DSpace research
Q18"M3" (broad money) includes currency with the public, demand deposits and:
  1. AForeign currency only
  2. BTime deposits with the banking system
  3. CGovernment bonds held abroad
  4. DGold reserves only
Q19A rise in the repo rate by the RBI is generally intended to:
  1. AIncrease inflation
  2. BCurb inflation by making borrowing costlier and reducing money supply
  3. CDevalue the rupee
  4. DIncrease exports automatically
Q20"Basel norms" relate to:
  1. AInternational standards for bank capital adequacy and risk management
  2. BTrade tariffs
  3. CAgricultural subsidies
  4. DCarbon emissions
Q21The body that insures bank deposits up to a specified limit in India is the:
  1. ASEBI
  2. BDeposit Insurance and Credit Guarantee Corporation (DICGC)
  3. CIRDAI
  4. DNABARD
Q22"NABARD" is the apex institution for:
  1. AStock market regulation
  2. BAgriculture and rural development finance
  3. CInsurance regulation
  4. DForeign trade
Q23A "scheduled bank" in India is one that is:
  1. AListed on a stock exchange only
  2. BIncluded in the Second Schedule of the RBI Act and meets prescribed conditions
  3. COwned by a foreign government
  4. DExempt from RBI regulation
Q24The "Unified Payments Interface" (UPI), a major digital payment system in India, is operated by the:
  1. ANational Payments Corporation of India (NPCI)
  2. BSEBI
  3. CWorld Bank
  4. DFinance Commission
Q25Which of the following best describes the RBI's dual role?
  1. AOnly printing currency
  2. BActing as the central bank: monetary authority, regulator of banks, manager of currency and the government's banker
  3. COnly collecting taxes
  4. DRunning commercial branches for the public

Answer key

Reveal the answer key and full worked solutions
Q Answer Why
1 (a) The RBI was established in 1935.
2 (b) As lender of last resort the RBI provides emergency liquidity to banks.
3 (a) The repo rate is the short-term lending rate against securities.
4 (b) The reverse repo rate is the rate at which the RBI absorbs liquidity from banks.
5 (b) CRR is the share of deposits kept as reserves with the RBI.
6 (b) SLR is held in liquid assets such as government securities, gold and cash.
7 (b) The Monetary Policy Committee sets the policy rate.
8 (b) The MPC targets price stability while keeping growth in mind.
9 (a) Open market operations are RBI purchases or sales of government securities.
10 (b) The RBI issues currency notes other than the one rupee note.
11 (b) The one rupee note and coins are issued by the Government of India.
12 (b) Fourteen major banks were nationalised in 1969.
13 (b) An NPA is a loan overdue beyond the specified period.
14 (b) The IBC provides a time-bound insolvency resolution process.
15 (b) Priority sector lending covers agriculture, small enterprises and weaker sections.
16 (b) Financial inclusion means affordable financial access for all.
17 (b) Jan Dhan Yojana advanced financial inclusion through basic accounts.
18 (b) M3 adds time deposits to currency and demand deposits.
19 (b) Raising the repo rate curbs inflation by tightening money.
20 (a) Basel norms set bank capital and risk standards internationally.
21 (b) The DICGC insures bank deposits up to a limit.
22 (b) NABARD is the apex body for rural and agricultural finance.
23 (b) A scheduled bank is in the Second Schedule of the RBI Act.
24 (a) UPI is operated by the NPCI.
25 (b) The RBI is the central bank with monetary, regulatory, currency and banker roles.

Cross-references

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