IKS MCQ PDF

INDIANKnowledgeSystem (IKS):INDIANBANKINGSECTOR QUESTIONBANK-(MULTIPLECHOICEQUESTIONS) UNIT – I Introduction to Indian Knowledge Systems (IKS):Overview of Vedas, Upanishads, Arthashastra, and their relevance to banking. Principles of...

INDIANKnowledgeSystem (IKS):INDIANBANKINGSECTOR QUESTIONBANK-(MULTIPLECHOICEQUESTIONS) UNIT – I Introduction to Indian Knowledge Systems (IKS):Overview of Vedas, Upanishads, Arthashastra, and their relevance to banking. Principles of Dharma, Artha, and Kautilya's Arthashastra in economic governance. 1. Which of the following is considered the earliest text in Indian Knowledge Systems? a) Upanishads b) Vedas c) Arthashastra d) Smritis Answer: b) Vedas 2. The Arthashastra, an ancient Indian treatise, primarily focuses on which of the following? a) Spirituality b) Politics, economy, and statecraft c) Meditation techniques d) Astronomy Answer: b) Politics, economy, and statecraft 3. Which of the following principles from the Upanishads promotes self-knowledge and understanding the nature of reality? a) Karma b) Brahman c) Moksha 1 d) Dharma Answer: b) Brahman 4. Which of the following is NOT a key element of Dharma in economic governance? a) Justice b) Righteousness c) Profit maximization d) Duty Answer: c) Profit maximization 5. Which ancient Indian text is known for providing detailed guidelines on statecraft, military strategy, and economic policy? a) Bhagavad Gita b) Manu Smriti c) Arthashastra d) Rig Veda Answer: c) Arthashastra 6. Kautilya's Arthashastra emphasizes the balance between which two major aspects of governance? a) Dharma and Moksha b) Artha and Kama c) Law and order, and economic growth d) Politics and religion Answer: c) Law and order, and economic growth 2 7. Which of the following Vedic concepts is closely associated with the proper functioning of a society through moral and ethical behavior? a) Artha b) Dharma c) Kama d) Nirvana Answer: b) Dharma 8. The Upanishads are mainly concerned with which of the following types of knowledge? a) Ritualistic knowledge b) Secular knowledge c) Philosophical and spiritual knowledge d) Medical knowledge Answer: c) Philosophical and spiritual knowledge 9. Which principle, according to the Arthashastra, should be the primary focus of economic governance? a) Wealth maximization b) Welfare of the state and its people c) Accumulation of personal wealth d) Control over religious institutions Answer: b) Welfare of the state and its people 10. How does the concept of Artha (as mentioned in Indian Knowledge Systems) relate to banking and finance today? 3 a) It encourages accumulation of wealth by any means. b) It emphasizes responsible economic management and wealth generation for societal well-being. c) It discourages economic activities in favor of spiritual growth. d) It suggests avoiding all forms of material wealth. Answer: b) It emphasizes responsible economic management and wealth generation for societal well-being. 11. What are the four collections of the Vedas? A) Rigveda, Samaveda, Yajurveda, Atharvaveda B) Ramayana, Mahabharata, Vedas, Puranas C) Upanishads, Bhagavad Gita, Vedas, Sutras D) Aranyakas, Brahmanas, Upanishads, Smritis Answer: A) Rigveda, Samaveda, Yajurveda, Atharvaveda 12. Which text is known for its teachings on statecraft and economic policy? A) Vedas B) Upanishads C) Arthashastra D) Manusmriti Answer: C) Arthashastra 13.What is the primary focus of the Upanishads? 4 A) Rituals and ceremonies B) Philosophy and metaphysics C) Statecraft and governance D) History and legends Answer: B) Philosophy and metaphysics 14.The concept of Artha emphasizes which of the following? A) Moral duties B) Material prosperity C) Spiritual knowledge D) Political authority Answer: B) Material prosperity 15. Kautilya’ s Arthashastra is primarily concerned with which of the following aspects? A) Agricultural practices B) Military strategies C) Economic governance D) Religious rituals Answer: C) Economic governance 16.Which principle focuses on ethical governance and justice? A) Artha B) Dharma C) Kautilya's philosophy D) Samaveda 5 Answer: B) Dharma 17. In the context of banking, what do the Vedas emphasize? 0A) Wealth accumulation at any cost B) Fair dealings and integrity C) Ritual sacrifices D) Tax evasion Answer: B) Fair dealings and integrity 18.Which of the following Vedas contains rituals and sacrificial formulas? A) Rigveda B) Samaveda C) Yajurveda D) Atharvaveda Answer: C) Yajurveda 19.What is the significance of Dharma in economic governance according to Indian Knowledge Systems? A) It promotes self-interest over collective welfare. B) It ensures moral and ethical conduct in governance. C) It disregards the need for laws and regulations. D) It focuses solely on profit maximization. Answer: B) It ensures moral and ethical conduct in governance. 20.Which text is considered the earliest source of economic thought in India? 6 A) Vedas B) Upanishads C) Arthashastra D) Puranas Answer: C) Arthashastra 21.What does Kautilya suggest regarding taxation in the Arthashastra? A) It should be avoided to ensure wealth accumulation. B) It should be high to maximize state revenue. C) It should be fair and based on economic capacity. D) It should only be applied to the wealthy. Answer: C) It should be fair and based on economic capacity. 22.Which of the following concepts is NOT associated with the Vedas? A) Hymns and prayers B) Rituals and ceremonies C) Statecraft and military strategy D) Knowledge of the cosmos Answer: C) Statecraft and military strategy 23.The Arthashastra discusses which of the following in detail? A) Spiritual liberation B) State administration and military strategy C) Philosophical debates D) Poetic compositions 7 Answer: B) State administration and military strategy 24.Which of the following is a key principle of economic governance in Kautilya's Arthashastra? A) Promotion of individualism B) Centralized control and efficiency C) Disregard for public welfare D) Emphasis on spiritual growth Answer: B) Centralized control and efficiency 25.In which Veda would you primarily find knowledge about medicine and healing? A) Rigveda B) Samaveda C) Yajurveda D) Atharvaveda Answer: D) Atharvaveda 8 Historical Evolution of Indian Banking: Ancient banking systems: Role of moneylenders, indigenous credit practices. Colonial impact: Emergence of modern banking institutions underBritish rule. 1. In ancient India, which group primarily played the role of bankers and moneylenders? a) Priests b) Kings c) Merchants d) Farmers Answer: c) Merchants 2. Which of the following was a key feature of indigenous credit practices in ancient India? a) Interest-free loans b) Formalized central banking institutions c) Informal credit networks and personal trust d) Government-backed bonds Answer: c) Informal credit networks and personal trust 3. Who were the traditional moneylenders in India, known for providing short-term credit to farmers and small traders? a) Zamindars b) Sahukars c) British officials d) Mughals Answer: b) Sahukars 9 4. Which ancient Indian document provides evidence of banking and financial transactions in the form of promissory notes or "hundis"? a) Arthashastra b) Manu Smriti c) Vedas d) Puranas Answer: a) Arthashastra 5. What was the primary impact of British colonial rule on the Indian banking system? a) Expansion of indigenous moneylender networks b) The introduction of modern banking institutions and regulatory systems c) Elimination of private credit practices d) Complete nationalization of all banks Answer: b) The introduction of modern banking institutions and regulatory systems 6. Which of the following was the first modern bank established in India under British rule? a) State Bank of India b) Bank of Bengal c) Reserve Bank of India d) Punjab National Bank Answer: b) Bank of Bengal 7. What financial instrument, widely used in traditional Indian banking, allowed merchants to transfer money across regions without physical currency exchange? a) Bills of exchange b) Hundis 10 c) Stocks d) Promissory notes Answer: b) Hundis 8. During British colonial rule, the establishment of which of the following banks marked the beginning of modern commercial banking in India? a) Allahabad Bank b) Imperial Bank of India c) Bank of Madras d) Reserve Bank of India Answer: c) Bank of Madras 9. Which major change in Indian banking occurred during British rule as a result of industrialization? a) Rise of cooperative banks b) Focus on rural credit systems c) Establishment of joint-stock banks d) Decline of all private lending practices Answer: c) Establishment of joint-stock banks 10. The Reserve Bank of India (RBI), established in 1935, was originally formed under the recommendations of which committee? a) Montagu-Chelmsford Reforms b) Hilton Young Commission c) Simon Commission d) Indian Banking Committee 11 Answer: b) Hilton Young Commission 11.Which of the following was the first modern bank established in India? A) Bank of Hindustan B) Bank of Bengal C) Reserve Bank of India D) Punjab National Bank Answer: A) Bank of Hindustan 12.What role did moneylenders play in ancient Indian banking? A) They were government officials. B) They provided informal credit to farmers and traders. C) They established modern banking institutions. D) They regulated currency. Answer: B) They provided informal credit to farmers and traders. 13.What financial instrument was commonly used in ancient India for transferring money and credit? A) Cheque B) Demand Draft C) Hundi D) Promissory Note Answer: C) Hundi 14.Which Act led to the establishment of joint-stock banks in India? 12 A) Indian Companies Act of 1866 B) Reserve Bank of India Act of 1934 C) Companies Act of 1913 D) Banking Regulation Act of 1949 Answer: A) Indian Companies Act of 1866 15.What year was the Reserve Bank of India established? A) 1930 B) 1935 C) 1947 D) 1950 Answer: B) 1935 16.Which type of banking practice involved pledging valuables for loans? A) Credit Rating B) Pawnbroking C) Moneylending D) Banking Answer: B) Pawnbroking 17,The Bank of Bengal was established in which year? A) 1770 B) 1806 C) 1840 D) 1935 13 Answer: B) 1806 18.Which community was primarily involved in informal banking practices during ancient times? A) Farmers B) Artisans C) Banias D) Merchants Answer: C) Banias 19.What was a significant outcome of British colonial rule on Indian banking? A) Disappearance of indigenous credit practices B) Introduction of modern banking institutions C) Regulation of traditional moneylenders D) Elimination of interest rates Answer: B) Introduction of modern banking institutions 20.The establishment of which bank marked the beginning of the joint-stock banking system in India? A) Bank of Hindustan B) Central Bank of India C) Punjab National Bank D) Bank of Bengal Answer: D) Bank of Bengal 21.What type of credit practice involved using financial instruments for trade settlements in ancient India? 14 A) Cheques B) Hundis C) Letters of Credit D) Bonds Answer: B) Hundis 22.In ancient India, the term "Shroff" referred to: A) Farmers B) Moneylenders and bankers C) Government officials D) Merchants Answer: B) Moneylenders and bankers 23.Which of the following was NOT a characteristic of ancient Indian banking? A) Informal lending practices B) Use of written contracts C) Centralized banking system D) Reliance on moneylenders Answer: C) Centralized banking system 24.The British introduced which of the following banking practices in India? A) Interest-free loans B) Modern banking institutions and regulation C) Community-based lending D) Agricultural financing Answer: B) Modern banking institutions and regulation 15 25.What was the primary function of the Reserve Bank of India when it was established? A) Regulating interest rates B) Acting as a commercial bank C) Serving as a central bank to manage currency and credit D) Facilitating foreign trade Answer: C) Serving as a central bank to manage currency and credit UNIT – II Traditional Banking Practices : Study of indigenous banking practices such as hundi system, chit funds, and informal credit networks.Role of cooperative banks and community-based financial institutions. 1. Which traditional financial instrument in India was used for transferring money or settling debts across long distances? a) Cheque b) Hundi c) Bond d) Letter of credit Answer: b) Hundi 2. In the hundi system, which of the following was the key aspect? a) Written promises between two parties b) Oral agreements between traders c) Government-backed bonds d) Currency exchange mechanism Answer: a) Written promises between two parties 16 3. Which of the following best describes a chit fund in India? a) A loan facility provided by banks b) A group savings and credit system where participants contribute money regularly and take turns receiving the pooled sum c) A government-backed savings scheme d) An investment bond Answer: b) A group savings and credit system where participants contribute money regularly and take turns receiving the pooled sum 4. What is a common feature of informal credit networks in India? a) They are strictly regulated by the Reserve Bank of India (RBI) b) They rely on personal trust and social relationships for lending c) They provide large business loans d) They are supported by international financial institutions Answer: b) They rely on personal trust and social relationships for lending 5. What is the main advantage of chit funds for participants, especially in rural areas? a) Guaranteed high returns b) Access to lump-sum funds without formal credit checks c) Government subsidies d) Fixed interest rates on loans Answer: b) Access to lump-sum funds without formal credit checks 17 6. Which traditional banking system was primarily used by merchants to finance long-distance trade? a) Credit cards b) Hundi system c) Cooperative banking d) Microfinance Answer: b) Hundi system 7. In the chit fund system, how is the lump-sum amount distributed? a) It is given to a participant based on random selection b) The participants compete by bidding, and the lowest bid wins the amount c) It is equally distributed among all participants d) It is given to the person with the highest contribution Answer: b) The participants compete by bidding, and the lowest bid wins the amount 8. Which of the following institutions typically supports rural credit in India? a) Commercial banks b) Cooperative banks c) International financial institutions d) Hedge funds Answer: b) Cooperative banks 9. Which act governs the functioning of chit funds in India? a) Banking Regulation Act b) Reserve Bank of India Act 18 c) Chit Funds Act, 1982 d) Cooperative Societies Act Answer: c) Chit Funds Act, 1982 10. Which sector of the population in India traditionally relied on informal credit networks like moneylenders and local financiers? a) Large corporations b) Small farmers, traders, and rural households c) Urban professionals d) Multinational companies Answer: b) Small farmers, traders, and rural households 11. In traditional banking, which group played a key role as intermediaries in the hundi system? a) Government officials b) Moneylenders and merchants c) Bankers d) Politicians Answer: b) Moneylenders and merchants 12. Which of the following describes a mutual credit system in traditional Indian banking? a) A credit system involving two or more financial institutions b) A trust-based system where participants lend and borrow money informally c) A government-backed loan system d) A credit card scheme Answer: b) A trust-based system where participants lend and borrow money informally 19 13. What is a key characteristic of cooperative banks in India? a) They are primarily profit-oriented b) They are owned and run by the members who use their services c) They are funded by multinational corporations d) They are only involved in large-scale industrial financing Answer: b) They are owned and run by the members who use their services 14. Which of the following is NOT a key feature of the hundi system? a) A formalized, written instrument b) A method of money transfer and credit settlement c) Based on personal trust between the issuer and the receiver d) Governed by modern banking regulations Answer: d) Governed by modern banking regulations 15. What is the primary goal of cooperative banks in rural areas? a) Profit maximization b) Providing low-cost financial services to members and promoting financial inclusion c) International trade finance d) High-interest loans to big businesses Answer: b) Providing low-cost financial services to members and promoting financial inclusion 16. Which of the following traditional practices is commonly used in India's informal credit networks? a) Fixed-term deposits 20 b) Barter exchange c) Personal loans based on trust and social relations d) Stock trading Answer: c) Personal loans based on trust and social relations 17. How does the chit fund system help individuals in times of financial need? a) By providing large business loans b) By allowing members to receive a lump sum in exchange for their contributions to the fund c) By offering government-backed insurance schemes d) By investing in mutual funds Answer: b) By allowing members to receive a lump sum in exchange for their contributions to the fund 18. Which type of financial institution is most closely associated with agricultural financing and rural development in India? a) Cooperative banks b) Commercial banks c) Private banks d) International banks Answer: a) Cooperative banks 19. The hundi system was used extensively in which of the following? a) International trading b) Long-distance trade within India and neighboring countries c) Industrial loans 21 d) Government bonds Answer: b) Long-distance trade within India and neighboring countries 20. In the chit fund system, what does the term "prized member" refer to? a) The participant who starts the chit fund b) The participant who wins the bid and receives the lump sum c) The member who pays the highest contribution d) The member responsible for managing the fund Answer: b) The participant who wins the bid and receives the lump sum 21. Which of the following institutions focuses on providing affordable financial services to farmers and small-scale industries? a) Cooperative banks b) Private equity firms c) Investment banks d) Stock exchanges Answer: a) Cooperative banks 22. In India's informal credit system, who typically serves as a lender in rural areas? a) Commercial banks b) Sahukars (moneylenders) c) International financial institutions d) Central banks Answer: b) Sahukars (moneylenders) 22 23. Which legislation regulates the formation and functioning of cooperative societies in India? a) The Cooperative Societies Act b) The Chit Funds Act, 1982 c) The Banking Regulation Act d) The Negotiable Instruments Act Answer: a) The Cooperative Societies Act 24. What is the key challenge associated with informal credit networks in traditional banking? a) Low interest rates b) Lack of formal documentation and legal protection c) Government-backed guarantees d) Availability of large loans Answer: b) Lack of formal documentation and legal protection 25. How do cooperative banks promote financial inclusion in rural areas? a) By offering high-interest loans b) By providing small, affordable loans and savings options to underserved communities c) By focusing exclusively on urban businesses d) By investing heavily in stock markets Answer: b) By providing small, affordable loans and savings options to underserved communities Kautilya's Arthashastra and Banking: Analysis of Kautilya's principles on finance, banking, and state finance management. Application of Arthashastra principles to contemporary banking practices. 23 1. Kautilya’ s Arthashastra primarily deals with which of the following subjects? a) Poetry and drama b) Statecraft, economics, and political governance c) Religion and philosophy d) Astronomy and mathematics Answer: b) Statecraft, economics, and political governance 2. Which of the following is NOT a focus of Kautilya's Arthashastra? a) Law enforcement b) Warfare strategies c) Cultural practices d) Economic management Answer: c) Cultural practices 3. In Kautilya’ s Arthashastra, which term is used to refer to the treasury? a) Kosha b) Dharma c) Artha d) Rajya Answer: a) Kosha 4. According to Kautilya, what is the primary purpose of a well-managed state treasury? a) To amass wealth for the ruler b) To ensure the prosperity and stability of the state 24 c) To fund religious activities d) To lend money to neighboring states Answer: b) To ensure the prosperity and stability of the state 5. Which of the following banking principles from Kautilya's Arthashastra can be applied to modern financial systems? a) Centralized control of credit systems b) Minimal government intervention in the economy c) Strict regulation of interest rates and credit policies d) Promotion of speculative investments Answer: c) Strict regulation of interest rates and credit policies 6. What does Kautilya suggest regarding taxation in Arthashastra? a) Tax rates should be extremely high to maximize state revenue b) Taxation should be fair and designed to avoid burdening the populace c) Taxes should be collected at irregular intervals d) Only landowners should be taxed Answer: b) Taxation should be fair and designed to avoid burdening the populace 7. In the context of banking, which of the following best represents Kautilya’ s view on lending and borrowing? a) Lending should be encouraged without regulation b) Lending should be regulated, with reasonable interest rates and safeguards for both lenders and borrowers c) Borrowing should be completely banned d) Interest rates should be determined by private agreements without state intervention 25 Answer: b) Lending should be regulated, with reasonable interest rates and safeguards for both lenders and borrowers 8. According to Kautilya, what role does the state have in managing finances? a) The state should be directly involved in managing public finances, including taxation, spending, and banking regulations b) The state should allow market forces to control financial matters c) The state should not interfere in financial matters at all d) The state should focus solely on military expenditure Answer: a) The state should be directly involved in managing public finances, including taxation, spending, and banking regulations 9. Which modern banking principle is reflected in Kautilya’ s Arthashastra’ s emphasis on careful financial oversight? a) Basel III norms on capital adequacy and risk management b) Complete deregulation of financial markets c) High-risk lending without restrictions d) Encouragement of speculative investments Answer: a) Basel III norms on capital adequacy and risk management 10. Kautilya’ s approach to state finance management includes which of the following practices? a) Arbitrary taxation b) Transparent and efficient financial administration c) Heavy reliance on foreign loans d) Promoting a free-market economy without state intervention Answer: b) Transparent and efficient financial administration 26 11. Kautilya’ s Arthashastra outlines which strategy for debt management? a) Debts should be written off after a certain period b) Loans should be repaid promptly to maintain the state’ s credibility and financial stability c) The state should rely entirely on private debt d) There is no mention of debt management Answer: b) Loans should be repaid promptly to maintain the state’ s credibility and financial stability 12. What does Kautilya advocate regarding interest rates in the Arthashastra? a) Interest rates should be unregulated and decided by lenders b) Interest rates should be regulated by the state to prevent exploitation c) Interest rates should be abolished altogether d) Only the ruler should decide interest rates Answer: b) Interest rates should be regulated by the state to prevent exploitation 13. How does Kautilya suggest dealing with corrupt financial officials in the state treasury? a) They should be pardoned after a warning b) They should be severely punished to deter financial mismanagement and corruption c) They should be promoted to higher positions d) They should be given a second chance to correct their behavior Answer: b) They should be severely punished to deter financial mismanagement and corruption 27 14. Which of the following contemporary banking practices aligns with Kautilya’ s principle of state-controlled currency minting? a) Cryptocurrency regulation b) Central bank’ s authority over money supply and currency minting c) Complete deregulation of monetary policies d) Allowing private entities to print currency Answer: b) Central bank’ s authority over money supply and currency minting 15. What did Kautilya recommend for maintaining the state’ s financial stability during times of economic downturn? a) Increase taxes significantly b) Reduce state expenditure and increase savings in the treasury c) Abandon all state revenue collection d) Borrow heavily from foreign states Answer: b) Reduce state expenditure and increase savings in the treasury 16. In Kautilya’ s Arthashastra, how is the relationship between the state and private businesses regulated? a) The state should interfere minimally in private business affairs b) The state should regulate business activities, particularly in areas of finance, to ensure ethical practices and prevent exploitation c) The state should nationalize all businesses d) The state should leave businesses completely unregulated Answer: b) The state should regulate business activities, particularly in areas of finance, to ensure ethical practices and prevent exploitation 28 17. What principle of economic governance from Kautilya’ s Arthashastra can be applied to modern public finance management? a) Complete privatization of financial institutions b) Prudent management of state resources and avoidance of fiscal deficits c) Unlimited borrowing to support state welfare d) Full deregulation of the banking sector Answer: b) Prudent management of state resources and avoidance of fiscal deficits 18. Which key principle from Arthashastra is used to ensure accountability in modern banking practices? a) Strict punishment for financial fraud and mismanagement b) Encouraging high-risk investments c) Allowing unchecked corporate control over banking d) Total lack of financial oversight Answer: a) Strict punishment for financial fraud and mismanagement 19. In contemporary banking, the Arthashastra’ s concept of "Dharma" (ethical conduct) would be most closely associated with which practice? a) Corporate social responsibility (CSR) b) High-interest payday loans c) Speculative trading in volatile markets d) Tax evasion strategies Answer: a) Corporate social responsibility (CSR) 20. What does Kautilya's Arthashastra suggest about maintaining public trust in financial management? 29 a) Trust is irrelevant to financial governance b) Public trust is crucial, and financial institutions should be transparent and ethical c) Financial institutions should be secretive to protect state interests d) Trust is secondary to profit-making Answer: b) Public trust is crucial, and financial institutions should be transparent and ethical 21. Kautilya’ s principles on state-controlled banking can be linked to which of the following modern concepts? a) Decentralized finance (DeFi) b) Nationalization of central banking functions c) Peer-to-peer lending platforms d) Venture capital funding Answer: b) Nationalization of central banking functions 22. Which of the following is an example of Kautilya’ s approach to resource management in the Arthashastra? a) Exhausting resources for immediate financial gains b) Sustainable use of state resources to ensure long-term financial stability c) Using resources primarily for religious purposes d) Selling state resources to foreign investors Answer: b) Sustainable use of state resources to ensure long-term financial stability 23. What would Kautilya’ s Arthashastra recommend for a financial crisis in a state? a) Engage in excessive borrowing from foreign powers b) Cut unnecessary expenses and prioritize essential state functions 30 c) Increase luxury expenditure to boost morale d) Devalue the state currency to generate more revenue Answer: b) Cut unnecessary expenses and prioritize essential state functions UNIT III Post-Independence Banking Reforms : Nationalization of banks: Objectives, impact, and challenges. Evolution of banking regulations and institutions post-independence. 1. When was the first major nationalization of banks in India? a) 1955 b) 1969 c) 1975 d) 1980 Answer: b) 1969 2. Which Prime Minister of India is credited with the nationalization of 14 major banks in 1969? a) Jawaharlal Nehru b) Lal Bahadur Shastri c) Indira Gandhi d) Rajiv Gandhi Answer: c) Indira Gandhi 3. What was one of the primary objectives of nationalizing banks in India? a) To increase competition among banks b) To ensure greater public control of the banking sector 31 c) To allow foreign banks to operate freely d) To encourage private ownership of banks Answer: b) To ensure greater public control of the banking sector 4. Which of the following was a key impact of the nationalization of banks in India? a) Concentration of banking in urban areas b) Expansion of banking services to rural and semi-urban areas c) Complete privatization of the banking sector d) Decrease in the number of public sector banks Answer: b) Expansion of banking services to rural and semi-urban areas 5. How many banks were nationalized in the second phase of nationalization in 1980? a) 4 banks b) 6 banks c) 8 banks d) 10 banks Answer: b) 6 banks 6. What was the major challenge faced by the Indian banking sector post-nationalization? a) Decrease in bank deposits b) Increase in non-performing assets (NPAs) c) Lack of government regulation d) Absence of foreign investment Answer: b) Increase in non-performing assets (NPAs) 32 7. Which regulatory body was established in 1935 and continues to play a critical role in banking regulation post-independence? a) Securities and Exchange Board of India (SEBI) b) Reserve Bank of India (RBI) c) Insurance Regulatory and Development Authority (IRDA) d) Pension Fund Regulatory and Development Authority (PFRDA) Answer: b) Reserve Bank of India (RBI) 8. What was the key reason for nationalizing banks in India during the 1969 reform? a) To bring the banking system under private control b) To ensure that the benefits of economic growth reached the common people c) To promote foreign ownership of Indian banks d) To reduce the number of banks in the country Answer: b) To ensure that the benefits of economic growth reached the common people 9. Which sector was the major focus of bank credit post-nationalization? a) Corporate sector b) Agriculture and rural development c) Real estate d) Tourism Answer: b) Agriculture and rural development 10. Which of the following was an outcome of the 1991 financial reforms in the banking sector? a) Complete nationalization of all banks b) Introduction of new private sector banks 33 c) Closure of all foreign banks in India d) Disinvestment in public sector banks Answer: b) Introduction of new private sector banks 11. Which committee, set up in 1991, is credited with major banking sector reforms in India? a) Narasimham Committee b) Kelkar Committee c) Rangarajan Committee d) Malhotra Committee Answer: a) Narasimham Committee 12. What was one of the main recommendations of the Narasimham Committee of 1991 for the banking sector? a) Nationalization of all foreign banks b) Encouraging privatization and reducing the role of public sector banks c) Creation of a single national bank d) Banning foreign investment in Indian banks Answer: b) Encouraging privatization and reducing the role of public sector banks 13. Which of the following institutions was established after India’ s independence to regulate cooperative banks? a) National Bank for Agriculture and Rural Development (NABARD) b) Industrial Development Bank of India (IDBI) c) State Bank of India (SBI) d) Punjab National Bank (PNB) 34 Answer: a) National Bank for Agriculture and Rural Development (NABARD) 14. What is the main focus of NABARD, which was established in 1982? a) Financing urban development b) Financing agricultural and rural development c) Promoting industrial growth d) Regulating private sector banks Answer: b) Financing agricultural and rural development 15. Which of the following is an important feature of the 2000s banking reforms in India? a) Complete abolition of banking regulations b) Introduction of Basel norms for capital adequacy c) Nationalization of all private sector banks d) Restriction of foreign banks’ operations in India Answer: b) Introduction of Basel norms for capital adequacy 16. The banking reform of 1991 that allowed new private banks to enter the market resulted in the establishment of which of the following banks? a) Reserve Bank of India b) HDFC Bank c) Indian Bank d) Canara Bank Answer: b) HDFC Bank 17. Which of the following was a challenge faced by the Indian banking sector in the immediate aftermath of nationalization? 35 a) Shortage of skilled manpower b) Rapid increase in profitability c) Excessive competition among private banks d) Decline in the number of branches Answer: a) Shortage of skilled manpower 18. Which of the following describes the effect of nationalization on banking accessibility in India? a) Increased banking services in rural and underserved areas b) Decreased accessibility to banking for the common people c) Greater focus on private banks d) Significant decline in bank branches Answer: a) Increased banking services in rural and underserved areas 19. What was a primary goal of the 1980 nationalization of six additional banks? a) To increase government revenue b) To further democratize the distribution of banking services c) To encourage foreign investment in banking d) To create large banking monopolies Answer: b) To further democratize the distribution of banking services 20. Which major financial institution was created in 1955 by taking over the operations of the Imperial Bank of India? a) Punjab National Bank b) Reserve Bank of India c) State Bank of India 36 d) Indian Overseas Bank Answer: c) State Bank of India 21. What was one of the key challenges faced by public sector banks after nationalization? a) Decline in rural outreach b) High operational costs and increasing NPAs c) Lack of government support d) Unrestricted growth of private banks Answer: b) High operational costs and increasing NPAs 22. Which of the following was introduced to reform the Indian banking sector in the 2000s to meet international standards? a) Deregulation of interest rates b) Implementation of Basel II norms for risk management c) Nationalization of more banks d) Complete withdrawal of foreign banks Answer: b) Implementation of Basel II norms for risk management 23. Which banking innovation was introduced post-independence to enhance financial inclusion in rural areas? a) Mobile banking b) Microfinance institutions c) Automated Teller Machines (ATMs) d) Internet banking Answer: b) Microfinance institutions 37 24. What was the result of the banking reforms initiated under the Narasimham Committee? a) Strengthening of public sector banks only b) Introduction of private sector competition and improved efficiency c) Removal of foreign banks from India d) Complete state ownership of all banks Answer: b) Introduction of private sector competition and improved efficiency 25. Which year marks the introduction of the liberalization policies that significantly impacted the banking sector in India? a) 1979 b) 1985 c) 1991 d) 2000 Answer: c) 1991 RoleofIndianBanksinEconomic Development: Contribution of banks to agriculture, small-scale industries, and rural development. Financing of priority sectors and inclusive growth initiatives. 1. What role do Indian banks play in the development of agriculture? a) Providing insurance to farmers b) Offering long-term investments in infrastructure c) Extending credit facilities and loans for agricultural activities d) Promoting international trade of agricultural goods Answer: c) Extending credit facilities and loans for agricultural activities 38 2. Which of the following sectors is classified as a priority sector by Indian banks? a) Real estate b) Agriculture c) Tourism d) Luxury goods Answer: b) Agriculture 3. Which government scheme was introduced to enhance financial inclusion by providing access to banking services for every household? a) Pradhan Mantri Jan Dhan Yojana (PMJDY) b) Pradhan Mantri Awas Yojana (PMAY) c) MGNREGA d) Make in India Answer: a) Pradhan Mantri Jan Dhan Yojana (PMJDY) 4. Which bank in India was primarily set up to finance the agricultural sector? a) Reserve Bank of India (RBI) b) National Bank for Agriculture and Rural Development (NABARD) c) State Bank of India (SBI) d) Indian Overseas Bank (IOB) Answer: b) National Bank for Agriculture and Rural Development (NABARD) 5. What is the primary purpose of the Priority Sector Lending (PSL) guidelines issued by the Reserve Bank of India? a) To encourage foreign investment 39 b) To ensure that banks lend a portion of their resources to sectors that impact the economy and society c) To provide subsidies to the corporate sector d) To reduce competition in the banking industry Answer: b) To ensure that banks lend a portion of their resources to sectors that impact the economy and society 6. Which of the following is NOT a part of priority sector lending in India? a) Agriculture b) Micro, Small, and Medium Enterprises (MSMEs) c) Education d) Foreign trade Answer: d) Foreign trade 7. Under the Priority Sector Lending guidelines, what percentage of a bank’ s total lending should be directed towards priority sectors? a) 20% b) 30% c) 40% d) 50% Answer: c) 40% 8. Which of the following schemes was launched by the Government of India to support small-scale industries with access to credit? a) Stand Up India b) Make in India 40 c) Atmanirbhar Bharat Abhiyan d) Mudra Yojana Answer: d) Mudra Yojana 9. Which of the following is a key focus of Indian banks in promoting rural development? a) Offering low-interest loans to urban businesses b) Financing infrastructure projects in metropolitan areas c) Providing financial services like savings accounts, loans, and insurance to rural populations d) Encouraging investment in foreign markets Answer: c) Providing financial services like savings accounts, loans, and insurance to rural populations 10. Which bank-led initiative helps provide micro-loans to small businesses, especially in rural and semi-urban areas? a) Pradhan Mantri Fasal Bima Yojana b) Micro Units Development and Refinance Agency (MUDRA) c) Start-Up India d) Make in India Answer: b) Micro Units Development and Refinance Agency (MUDRA) 11. Which of the following is a benefit of the Kisan Credit Card (KCC) scheme for farmers? a) Subsidies for real estate investments b) Access to affordable credit for agricultural activities c) Loans for urban development d) Tax-free agricultural income 41 Answer: b) Access to affordable credit for agricultural activities 12. Which institution provides financial support to rural and cooperative banks to improve rural infrastructure? a) Small Industries Development Bank of India (SIDBI) b) National Housing Bank (NHB) c) National Bank for Agriculture and Rural Development (NABARD) d) Export-Import Bank of India (EXIM) Answer: c) National Bank for Agriculture and Rural Development (NABARD) 13. The Self-Help Group (SHG) model in India, supported by banks, aims to promote which of the following? a) Large corporate investments b) Financial inclusion and microcredit for women and marginalized groups c) Foreign investment in India d) International trade Answer: b) Financial inclusion and microcredit for women and marginalized groups 14. Which of the following is a key role of Indian banks in the development of Micro, Small, and Medium Enterprises (MSMEs)? a) Increasing taxes on MSMEs b) Providing collateral-free loans and financial support to MSMEs c) Restricting MSME activities d) Promoting the merger of MSMEs with large corporations Answer: b) Providing collateral-free loans and financial support to MSMEs 42 15. Which of the following is NOT a contribution of banks to inclusive growth? a) Financial inclusion through bank accounts and credit access for all citizens b) Funding speculative investments in the stock market c) Offering microfinance services to low-income groups d) Supporting rural development and priority sectors Answer: b) Funding speculative investments in the stock market 16. Which initiative, led by Indian banks, aims to provide affordable housing loans for economically weaker sections of society? a) Pradhan Mantri Awas Yojana (PMAY) b) Make in India c) Start-up India d) Swachh Bharat Abhiyan Answer: a) Pradhan Mantri Awas Yojana (PMAY) 17. What is the role of Small Industries Development Bank of India (SIDBI)? a) Financing foreign trade b) Providing funds and support to small-scale industries and MSMEs c) Regulating the stock market d) Offering loans to large multinational corporations Answer: b) Providing funds and support to small-scale industries and MSMEs 18. Which banking initiative focuses on providing financial assistance to women entrepreneurs from marginalized communities? a) Stand Up India b) Digital India 43 c) Skill India d) Ayushman Bharat Answer: a) Stand Up India 19. Which of the following is a major initiative for financial literacy and inclusion among rural populations in India? a) National Rural Employment Guarantee Act (NREGA) b) Pradhan Mantri Kaushal Vikas Yojana (PMKVY) c) Financial Literacy and Credit Counselling (FLCC) centers d) National Pension System (NPS) Answer: c) Financial Literacy and Credit Counselling (FLCC) centers 20. Which government program encourages banks to open zero-balance savings accounts for the unbanked population? a) Atal Pension Yojana (APY) b) Pradhan Mantri Jan Dhan Yojana (PMJDY) c) Pradhan Mantri Suraksha Bima Yojana (PMSBY) d) Swachh Bharat Mission Answer: b) Pradhan Mantri Jan Dhan Yojana (PMJDY) 21. What is the purpose of the Lead Bank Scheme in India? a) To support large-scale industrial growth b) To assign a lead bank in each district to ensure coordinated development of banking services c) To promote foreign direct investment in banks d) To deregulate the banking sector 44 Answer: b) To assign a lead bank in each district to ensure coordinated development of banking services 22. Which of the following programs was launched to promote entrepreneurship in India by providing easy access to finance for start-ups and small businesses? a) Start-Up India b) Make in India c) Digital India d) Swachh Bharat Mission Answer: a) Start-Up India 23. What is the objective of the Pradhan Mantri MUDRA Yojana (PMMY)? a) To finance large corporations b) To provide microcredit to small and micro enterprises c) To increase foreign direct investment d) To promote urban infrastructure development Answer: b) To provide microcredit to small and micro enterprises 24. Which of the following sectors receives priority in terms of lending by Indian banks? a) Agriculture, MSMEs, housing for economically weaker sections, and education b) Large-scale industries and multinational corporations UNIT IV Traditional Indian Concepts in Modern Banking : Integration of trust, transparency, and ethical values in modern banking operations.Case studies on banks incorporating traditional values into theirbusiness models. 45 1. Which traditional Indian concept is closely associated with trust and ethical behavior in business and banking? a) Artha b) Dharma c) Karma d) Maya Answer: b) Dharma 2. How can the concept of "Dharma" be applied in modern banking operations? a) By focusing on maximizing profit over customer satisfaction b) By promoting ethical banking practices and ensuring fairness in financial transactions c) By discouraging the use of technology in banking d) By encouraging higher interest rates on loans Answer: b) By promoting ethical banking practices and ensuring fairness in financial transactions 3. What is the role of trust in traditional Indian banking systems, such as the Hundi system? a) Ensuring high-interest profits b) Building long-term relationships based on mutual trust and credibility c) Promoting foreign investment d) Reducing competition between lenders Answer: b) Building long-term relationships based on mutual trust and credibility 4. Which value from traditional Indian philosophy is critical for ensuring transparency in modern banking? 46 a) Satya (Truth) b) Rajas (Passion) c) Tamas (Ignorance) d) Moksha (Liberation) Answer: a) Satya (Truth) 5. Which of the following is a key benefit of integrating traditional Indian values like trust and transparency into modern banking? a) Increased focus on profits over customer service b) Enhanced customer loyalty and long-term relationships c) Decreased transparency in operations d) Reduced interest in ethical banking products Answer: b) Enhanced customer loyalty and long-term relationships 6. Incorporating the concept of "ethical banking" in modern practices is most closely aligned with which traditional Indian philosophy? a) Ahimsa (Non-violence) b) Artha (Material success) c) Moksha (Spiritual liberation) d) Dharma (Righteous conduct) Answer: d) Dharma (Righteous conduct) 7. Which of the following modern banking initiatives reflects the traditional value of transparency? a) Hidden charges in loan agreements b) Full disclosure of fees, charges, and interest rates 47 c) Denying customers access to financial records d) Promoting speculation in high-risk investments Answer: b) Full disclosure of fees, charges, and interest rates 8. Which bank in India is known for incorporating the values of trust and ethical governance into its business model? a) Yes Bank b) HDFC Bank c) The State Bank of India d) SVC Co-operative Bank Answer: d) SVC Co-operative Bank 9. In which way does the traditional value of “ Sewa” (service) manifest in modern banking? a) By offering high-interest loans to generate profit b) By focusing on customer-centric banking services and improving financial inclusion c) By reducing transparency in operations d) By prioritizing the bank’ s growth over customer welfare Answer: b) By focusing on customer-centric banking services and improving financial inclusion 10. Which of the following describes a case where a bank integrated ethical values into its business model? a) A bank hiding service charges to increase profits b) A bank offering Sharia-compliant banking products based on Islamic ethical principles c) A bank focusing exclusively on speculative investments 48 d) A bank denying loans to underprivileged sectors Answer: b) A bank offering Sharia-compliant banking products based on Islamic ethical principles 11. The principle of "Sarvodaya" (welfare for all) in modern banking is reflected in which of the following? a) Exclusive services for high-net-worth individuals b) Providing affordable financial services to all sections of society, especially the underprivileged c) Restricting banking services to urban areas d) Prioritizing speculative investments Answer: b) Providing affordable financial services to all sections of society, especially the underprivileged 12. Which of the following initiatives represents the value of financial inclusion as part of traditional Indian ethics in banking? a) Limiting banking access to high-income individuals b) Expanding banking services to rural and underserved communities through the Pradhan Mantri Jan Dhan Yojana c) Offering high-risk investment products to customers d) Encouraging short-term, speculative banking practices Answer: b) Expanding banking services to rural and underserved communities through the Pradhan Mantri Jan Dhan Yojana 13. Which ethical principle, drawn from traditional Indian culture, would promote transparency in lending practices? a) Lobh (Greed) b) Satya (Truthfulness) 49 c) Matsarya (Envy) d) Moha (Attachment) Answer: b) Satya (Truthfulness) 14. What is a modern banking initiative that demonstrates the integration of traditional values like simplicity and trust in rural credit? a) Offering complex financial derivatives to rural customers b) Providing simple, easily understandable loan products to farmers and small businesses c) Hiding important financial information in contracts d) Introducing speculative trading in rural markets Answer: b) Providing simple, easily understandable loan products to farmers and small businesses 15. How does the concept of "Vasudhaiva Kutumbakam" (the world is one family) influence banking practices in modern India? a) By promoting only local banking initiatives b) By encouraging inclusive financial practices and global collaboration c) By focusing solely on profit-making activities d) By restricting banking services to a specific region Answer: b) By encouraging inclusive financial practices and global collaboration 16. Which modern banking concept aligns with the traditional Indian value of "Satya" (truth) and "Ahimsa" (non-harm) in financial dealings? a) Speculative trading practices b) Ethical banking and responsible finance c) Charging excessive interest rates 50 d) Hiding terms and conditions from customers Answer: b) Ethical banking and responsible finance 17. The Reserve Bank of India’ s emphasis on financial literacy and customer awareness aligns with which traditional Indian value? a) Maya (Illusion) b) Vidya (Knowledge) c) Kama (Desire) d) Rajas (Activity) Answer: b) Vidya (Knowledge) 18. In modern banking, how is the traditional value of "Seva" (service) best reflected? a) By focusing solely on high-profit products b) By prioritizing customer service and helping underserved communities c) By charging higher fees to customers d) By reducing customer service operations to cut costs Answer: b) By prioritizing customer service and helping underserved communities 19. Which traditional Indian value emphasizes the importance of ethical investment decisions in banking? a) Rajas (Passion) b) Ahimsa (Non-harm) c) Tamas (Inertia) d) Kama (Desire) Answer: b) Ahimsa (Non-harm) 51 20. Which bank in India has integrated environmental, social, and governance (ESG) criteria into its business model, reflecting the value of sustainable development? a) ICICI Bank b) State Bank of India (SBI) c) HDFC Bank d) Yes Bank Answer: d) Yes Bank 21. In which way do modern cooperative banks embody the traditional Indian value of community and cooperation? a) By focusing on maximizing shareholder profits b) By operating on a not-for-profit basis and prioritizing the welfare of their members c) By reducing services for rural communities d) By excluding small-scale farmers from their services Answer: b) By operating on a not-for-profit basis and prioritizing the welfare of their members 22. Which modern banking initiative is closely aligned with the concept of "Satyagraha" (non-violent resistance) in terms of promoting financial empowerment? a) Microfinance programs that provide small loans to marginalized groups, particularly women b) Exclusive banking services for the wealthy c) High-risk speculative investment schemes d) Reducing transparency in financial products Answer: a) Microfinance programs that provide small loans to marginalized groups, particularly women 52 23. What does the value of "Loka-Sangraha" (the welfare of all) in banking encourage? a) Focusing only on high-income customers b) Ensuring that banking services contribute to the welfare and upliftment of all sections of society c) Reducing customer care services to minimize costs d) Excluding rural areas from banking services TechnologyandInnovation in Indian Banking : Adoption of technology in banking: Core banking solutions, digital payments, and fintech innovations. Challenges and opportunities of technologicaladvancement in preserving traditional banking values. 1. Which of the following best describes "Core Banking Solutions" (CBS)? a) A system that allows customers to access banking services only at their branch b) A centralized banking platform that enables banking services across multiple branches c) A method of traditional banking without technology d) A service focused solely on investment banking Answer: b) A centralized banking platform that enables banking services across multiple branches 2. What is the primary benefit of adopting digital payment systems in Indian banking? a) Increased reliance on cash transactions b) Enhanced convenience and speed of financial transactions c) Limited accessibility for rural customers d) Higher transaction costs Answer: b) Enhanced convenience and speed of financial transactions 53 3. Which fintech innovation is primarily focused on providing loans to individuals and small businesses through online platforms? a) Robo-advisors b) Peer-to-peer lending platforms c) Cryptocurrencies d) Digital wallets Answer: b) Peer-to-peer lending platforms 4. What technology enables secure online transactions and protects customer data in banking? a) Blockchain b) E-mail c) Telephone banking d) Fax machines Answer: a) Blockchain 5. Which of the following is a challenge faced by traditional banks when adopting new technologies? a) Improved customer engagement b) High implementation costs and integration issues c) Increased customer satisfaction d) Access to a wider customer base Answer: b) High implementation costs and integration issues 6. Which of the following is an example of a digital payment system in India? a) Demand drafts 54 b) Unified Payments Interface (UPI) c) Cheques d) Money orders Answer: b) Unified Payments Interface (UPI) 7. How does the adoption of technology in banking help in preserving traditional banking values? a) By eliminating customer service interactions b) By enhancing transparency and accountability in financial transactions c) By focusing solely on profits d) By reducing access to banking services Answer: b) By enhancing transparency and accountability in financial transactions 8. What is a major advantage of using Artificial Intelligence (AI) in banking? a) Reduced efficiency in customer service b) Enhanced fraud detection and risk assessment c) Increased human errors in transactions d) Limited availability of financial products Answer: b) Enhanced fraud detection and risk assessment 9. Which digital initiative by the Indian government aims to promote financial literacy and digital payments? a) Pradhan Mantri Awas Yojana b) Digital India initiative c) Atal Pension Yojana d) Start-Up India 55 Answer: b) Digital India initiative 10. What is a significant risk associated with the increasing adoption of fintech in the banking sector? a) Increased customer trust b) Greater accessibility to financial services c) Data security and privacy concerns d) Enhanced financial literacy Answer: c) Data security and privacy concerns 11. Which of the following technologies has transformed customer service in banking through automation? a) Chatbots and virtual assistants b) Physical bank branches c) Manual account management d) Fax machines Answer: a) Chatbots and virtual assistants 12. Which feature of digital banking allows customers to perform banking transactions anytime and anywhere? a) Fixed banking hours b) Physical branch visits c) Mobile banking apps and online banking portals d) Paper-based transactions Answer: c) Mobile banking apps and online banking portals 56 13. Which Indian bank was one of the first to implement Core Banking Solutions (CBS)? a) State Bank of India (SBI) b) HDFC Bank c) ICICI Bank d) Punjab National Bank (PNB) Answer: a) State Bank of India (SBI) 14. What does the term "fintech" refer to in the banking context? a) Traditional banking methods b) Financial technologies that improve and automate the delivery of financial services c) Government policies on banking d) Manual bookkeeping practices Answer: b) Financial technologies that improve and automate the delivery of financial services 15. Which of the following is a benefit of using mobile wallets in banking? a) Increased reliance on cash transactions b) Enhanced security and convenience in making payments c) Limited accessibility for customers d) Higher transaction fees Answer: b) Enhanced security and convenience in making payments 16. Which technology is often used for enabling faster and more secure cross-border transactions? a) Blockchain b) E-mails 57 c) Telephone calls d) Postal services Answer: a) Blockchain 17. What challenge do banks face in integrating fintech solutions into their existing systems? a) High customer demand b) Regulatory compliance and security concerns c) Increased customer engagement d) Enhanced financial literacy among users Answer: b) Regulatory compliance and security concerns 18. Which of the following allows users to transfer money directly from one bank account to another using a mobile app? a) Demand draft b) Electronic Funds Transfer (EFT) c) Cheque d) ATM withdrawal Answer: b) Electronic Funds Transfer (EFT) 19. How can technology help preserve customer trust in banking? a) By making services more complex b) By providing transparent transaction histories and fraud alerts c) By limiting customer access to their accounts d) By increasing transaction fees Answer: b) By providing transparent transaction histories and fraud alerts 58 20. Which Indian payment app has gained significant popularity for facilitating instant money transfers and payments? a) PayPal b) Paytm c) Western Union d) Venmo Answer: b) Paytm 21. Which emerging technology is used by banks to analyze customer data and improve personalized services? a) Big Data Analytics b) Manual data entry c) Traditional bookkeeping d) Postal services Answer: a) Big Data Analytics 22. Which regulatory body in India is responsible for overseeing technological innovations in the banking sector? a) Securities and Exchange Board of India (SEBI) b) Reserve Bank of India (RBI) c) Insurance Regulatory and Development Authority (IRDA) d) Ministry of Finance Answer: b) Reserve Bank of India (RBI) 23. Which of the following is a potential downside of adopting technology in banking? 59 a) Improved service efficiency b) Increased customer engagement c) Job displacement for traditional banking staff d) Enhanced data analysis capabilities Answer: c) Job displacement for traditional banking staff 24. What is a key feature of "Digital India" that benefits the banking sector? a) Restricting access to banking services b) Promoting digital literacy and infrastructure development c) Reducing the number of banking branches d) Limiting technology adoption Answer: b) Promoting digital literacy and infrastructure development 25. What is the purpose of implementing biometric authentication in banking? a) To simplify the transaction process b) To enhance security and prevent unauthorized access to accounts c) To increase customer complaints d) To reduce customer engagement Answer: b) To enhance security and prevent unauthorized access to accounts UNIT V Financial Inclusion and Banking Outreach : Government initiatives for financial inclusion: Jan Dhan Yojana, PMJDY, Aadhaar-enabled payment systems. Role of banks in extending services totheunbanked and underprivileged. 1. What is the main objective of the Pradhan Mantri Jan Dhan Yojana (PMJDY)? 60 a) To promote foreign investment b) To ensure every citizen has access to banking facilities c) To reduce taxes on banking transactions d) To provide loans exclusively to urban customers Answer: b) To ensure every citizen has access to banking facilities 2. Which of the following is a key feature of the Jan Dhan Yojana? a) Mandatory minimum balance requirement b) Interest rates only for urban customers c) Zero-balance accounts with basic banking facilities d) Exclusion of rural areas from banking services Answer: c) Zero-balance accounts with basic banking facilities 3. What does "Aadhaar-enabled payment systems" primarily rely on? a) Physical cash transactions b) Biometric identification for secure transactions c) Traditional cheque payments d) Manual data entry for transactions Answer: b) Biometric identification for secure transactions 4. Which government initiative aims to promote financial literacy alongside financial inclusion? a) Make in India b) Digital India c) Pradhan Mantri Financial Literacy Program (PMFLP) 61 d) Atal Pension Yojana Answer: c) Pradhan Mantri Financial Literacy Program (PMFLP) 5. Which of the following groups is specifically targeted by the PMJDY for financial inclusion? a) High-net-worth individuals b) Unbanked and underprivileged sections of society c) Corporate businesses d) Foreign investors Answer: b) Unbanked and underprivileged sections of society 6. Which of the following is NOT a benefit of the PMJDY? a) Access to banking services b) Overdraft facility for account holders c) Higher interest rates on savings accounts d) Life insurance coverage for account holders Answer: c) Higher interest rates on savings accounts 7. What is the role of banks under the PMJDY? a) To limit banking services to urban areas b) To promote digital transactions exclusively c) To provide financial products and services to the unbanked population d) To reduce the number of ATMs in rural areas Answer: c) To provide financial products and services to the unbanked population 62 8. Which payment system utilizes Aadhaar numbers to facilitate financial transactions? a) National Electronic Funds Transfer (NEFT) b) Real-Time Gross Settlement (RTGS) c) Aadhaar Payment Bridge (APB) d) Immediate Payment Service (IMPS) Answer: c) Aadhaar Payment Bridge (APB) 9. How does the government promote the use of Aadhaar for financial transactions? a) By making Aadhaar optional for banking services b) By integrating Aadhaar with banking services to enhance accessibility and security c) By limiting Aadhaar to government subsidies only d) By requiring physical documentation for all transactions Answer: b) By integrating Aadhaar with banking services to enhance accessibility and security 10. Which of the following measures aims to enhance financial inclusion in rural areas? a) Establishment of only urban banks b) Microfinance initiatives targeting rural entrepreneurs c) Increasing ATM fees in rural locations d) Reducing the number of bank branches in villages Answer: b) Microfinance initiatives targeting rural entrepreneurs 11. What percentage of Indian households were estimated to have a bank account under the PMJDY by the end of 2022? a) 30% b) 50% 63 c) 70% d) 100% Answer: c) 70% 12. Which initiative complements the PMJDY by focusing on financial literacy and consumer awareness? a) Skill India b) Digital India c) Financial Literacy Week d) Make in India Answer: c) Financial Literacy Week 13. Which of the following is a challenge in achieving financial inclusion in India? a) Increasing literacy rates b) Limited access to banking infrastructure in rural areas c) High smartphone penetration d) Government support for digital payments Answer: b) Limited access to banking infrastructure in rural areas 14. What is the significance of the "Financial Inclusion Index" introduced by the Reserve Bank of India (RBI)? a) To measure the profitability of banks b) To assess the level of financial inclusion in the country c) To regulate foreign investment in banking d) To determine the interest rates on loans Answer: b) To assess the level of financial inclusion in the country 64 15. What role do banks play in promoting self-help groups (SHGs) for financial inclusion? a) Providing high-interest loans to SHGs b) Ignoring SHGs and focusing on corporate clients c) Offering credit, training, and financial services to empower SHGs d) Restricting SHGs from accessing bank services Answer: c) Offering credit, training, and financial services to empower SHGs 16. Which of the following best describes the "Pradhan Mantri Mudra Yojana" (PMMY)? a) A scheme for large corporate loans b) A government initiative to provide micro-financing for small businesses c) A program for promoting foreign banks in India d) A scheme to limit access to loans for small businesses Answer: b) A government initiative to provide micro-financing for small businesses 17. What is the aim of the "Aadhaar-based payment system"? a) To limit transactions to cash payments b) To enhance the speed and security of transactions through biometric verification c) To discourage digital payments d) To prioritize traditional banking methods Answer: b) To enhance the speed and security of transactions through biometric verification 18. Which of the following is a potential benefit of financial inclusion for the unbanked population? a) Limited access to financial products 65 b) Increased savings and investment opportunities c) Higher transaction costs d) Exclusion from government subsidies Answer: b) Increased savings and investment opportunities 19. How does financial inclusion contribute to economic growth? a) By limiting access to banking services b) By providing more individuals with access to credit and financial services, fostering entrepreneurship c) By focusing solely on urban customers d) By increasing the cost of banking transactions Answer: b) By providing more individuals with access to credit and financial services, fostering entrepreneurship 20. Which demographic group has seen significant benefits from the Jan Dhan Yojana? a) Wealthy urban residents b) Rural farmers and low-income households c) Large corporations d) Foreign investors Answer: b) Rural farmers and low-income households 21. Which technology plays a significant role in facilitating Aadhaar-enabled payment systems? a) Paper-based transactions b) Biometric scanners c) Traditional banking methods 66 d) Fax machines Answer: b) Biometric scanners 22. Which of the following statements is true about the Jan Dhan Yojana? a) It focuses only on urban financial inclusion. b) It provides insurance coverage and overdraft facilities to account holders. c) It requires a minimum balance in accounts. d) It restricts account opening to specific demographics. Answer: b) It provides insurance coverage and overdraft facilities to account holders. 23. What is the significance of promoting digital literacy in financial inclusion efforts? a) To increase reliance on cash transactions b) To ensure that individuals can effectively use digital payment systems and access financial services c) To discourage technology use in banking d) To limit banking services to urban areas Answer: b) To ensure that individuals can effectively use digital payment systems and access financial services 24. How do banks contribute to financial inclusion through microfinance? a) By providing large loans to corporations only b) By offering small loans to low-income individuals and entrepreneurs c) By increasing fees for small accounts d) By excluding women from borrowing opportunities Answer: b) By offering small loans to low-income individuals and entrepreneurs 67 25. What is a key strategy for banks to reach the unbanked population in rural areas? a) Limiting services to urban branches b) Establishing business correspondents and agents in local communities c) Reducing the number of bank branches d) Increasing minimum balance requirements Contemporary Issues and Challenges: Non-performing assets (NPAs), banking sector reforms, Basel norms, and regulatory challenges. Sustainability and social responsibility in banking: Indigenous approaches toresponsible banking. 1. What is the primary definition of Non-Performing Assets (NPAs) in banking? a) Assets that generate high returns b) Loans that are overdue for more than 90 days c) Assets that are fully paid off d) Investments in government securities Answer: b) Loans that are overdue for more than 90 days 2. Which of the following is a major consequence of high NPAs in the banking sector? a) Increased profitability b) Reduced lending capacity and financial instability c) Enhanced customer trust d) Lower interest rates for borrowers Answer: b) Reduced lending capacity and financial instability 3. Which banking sector reform aims to improve the capital adequacy of banks? 68 a) Financial Inclusion Initiative b) Basel III norms c) Pradhan Mantri Jan Dhan Yojana d) Digital India Initiative Answer: b) Basel III norms 4. What is one of the key requirements of Basel III regulations? a) Banks should have a minimum capital adequacy ratio of at least 8% b) Banks should focus solely on retail banking c) Banks must eliminate all NPAs d) Banks should reduce their customer base Answer: a) Banks should have a minimum capital adequacy ratio of at least 8% 5. What is the primary objective of the Asset Quality Review (AQR) conducted by the Reserve Bank of India (RBI)? a) To assess the profitability of banks b) To evaluate the quality of assets and identify NPAs c) To promote digital banking d) To enhance customer satisfaction Answer: b) To evaluate the quality of assets and identify NPAs 6. Which of the following is NOT a component of the Basel III framework? a) Leverage Ratio b) Liquidity Coverage Ratio (LCR) c) Capital Conservation Buffer 69 d) Credit Default Swap (CDS) Answer: d) Credit Default Swap (CDS) 7. What is the purpose of the Prompt Corrective Action (PCA) framework in Indian banking? a) To encourage banks to take risks b) To impose restrictions on banks with weak financial health c) To eliminate customer complaints d) To promote financial literacy among customers Answer: b) To impose restrictions on banks with weak financial health 8. Which of the following is a significant challenge in the Indian banking sector? a) Excessive liquidity b) High levels of Non-Performing Assets (NPAs) c) Strong regulatory compliance d) Low interest rates on loans Answer: b) High levels of Non-Performing Assets (NPAs) 9. What does the term "stress testing" refer to in the context of banking? a) Evaluating the customer service skills of bank staff b) Assessing how banks can handle economic shocks and financial stress c) Testing the strength of physical bank branches d) Reducing interest rates during a crisis Answer: b) Assessing how banks can handle economic shocks and financial stress 70 10. Which of the following principles is central to sustainability in banking? a) Short-term profits over long-term stability b) Integrating environmental, social, and governance (ESG) factors into decision-making c) Limiting customer outreach d) Maximizing loan defaults Answer: b) Integrating environmental, social, and governance (ESG) factors into decision-making 11. How do indigenous approaches to responsible banking typically differ from conventional banking practices? a) They focus on maximizing profits without regard for the community. b) They prioritize community welfare and sustainable development. c) They ignore local customs and traditions. d) They emphasize rapid loan disbursement regardless of risk. Answer: b) They prioritize community welfare and sustainable development. 12. Which organization is responsible for formulating banking regulations in India? a) Securities and Exchange Board of India (SEBI) b) Reserve Bank of India (RBI) c) Ministry of Finance d) National Bank for Agriculture and Rural Development (NABARD) Answer: b) Reserve Bank of India (RBI) 13. What role does corporate governance play in addressing NPAs? a) It has no impact on NPAs. b) It promotes transparency and accountability in lending practices. 71 c) It encourages banks to take more risks. d) It reduces the need for regulatory oversight. Answer: b) It promotes transparency and accountability in lending practices. 14. Which of the following is a benefit of implementing sustainable banking practices? a) Increased risks and liabilities b) Improved reputation and customer loyalty c) Higher operational costs d) Short-term focus on profits Answer: b) Improved reputation and customer loyalty 15. What is the purpose of the "Green Banking" initiative? a) To promote investments in fossil fuels b) To encourage environmentally sustainable banking practices c) To eliminate all loans d) To restrict banking services to urban areas Answer: b) To encourage environmentally sustainable banking practices 16. What does the term "regulatory arbitrage" refer to in banking? a) Compliance with regulations b) Taking advantage of differences in regulations to avoid compliance c) Promoting transparency in financial reporting d) Enhancing customer engagement Answer: b) Taking advantage of differences in regulations to avoid compliance 72 17. Which of the following strategies can banks adopt to manage NPAs effectively? a) Increasing interest rates on all loans b) Strengthening risk assessment and credit appraisal processes c) Reducing the number of loan officers d) Ignoring defaulting customers Answer: b) Strengthening risk assessment and credit appraisal processes 18. Which of the following is an example of a regulatory challenge faced by banks? a) Excessive profitability b) Keeping up with evolving regulations and compliance requirements c) High customer satisfaction d) Robust lending practices Answer: b) Keeping up with evolving regulations and compliance requirements 19. What is the primary focus of Basel II norms? a) Economic growth b) Capital adequacy, risk management, and supervisory review c) Customer engagement d) Technology adoption Answer: b) Capital adequacy, risk management, and supervisory review 20. Which of the following measures can help in reducing the level of NPAs in banks? a) Ignoring customer repayment issues b) Regular monitoring of borrower performance c) Decreasing loan approval processes 73 d) Promoting high-risk lending practices Answer: b) Regular monitoring of borrower performance 21. What is the significance of "Social Responsibility" in banking? a) It promotes profits at any cost. b) It ensures that banks contribute positively to society while conducting their business. c) It encourages banks to reduce customer outreach. d) It focuses only on shareholder interests. Answer: b) It ensures that banks contribute positively to society while conducting their business. 22. How do high NPAs impact the overall economy? a) They lead to increased consumer confidence. b) They reduce the ability of banks to lend, hampering economic growth. c) They improve the liquidity of the banking system. d) They enhance the stability of the financial system. Answer: b) They reduce the ability of banks to lend, hampering economic growth. 23. What is the main goal of sustainable banking practices? a) To increase profits regardless of environmental impact b) To achieve a balance between financial performance and social responsibility c) To limit access to financial services for certain groups d) To focus solely on short-term gains Answer: b) To achieve a balance between financial performance and social responsibility 74 24. What does the term "liquidity coverage ratio" in Basel III refer to? a) The ratio of total assets to liabilities b) The amount of liquid assets a bank must hold to cover short-term obligations c) The percentage of loans to deposits d) The ratio of NPAs to total loans Answer: b) The amount of liquid assets a bank must hold to cover short-term obligations 25. Which of the following best describes "Responsible Banking"? a) Focusing only on profitability and shareholder value b) Integrating ethical practices, sustainability, and community welfare into banking operations c) Limiting services to high-income individuals d) Reducing customer engagement to cut costs Answer: b) Integrating ethical practices, sustainability, and community welfare into banking operations 75 76