Banking Finance MCQ (Sem 1) PDF

MCQ OF BANKING & FINANCIAL SERVICES (UNIT: 1 & 2) 1. Which of the following institutions is the central bank of India?  A) Commercial Banks  B) Cooperative Banks  C) Regional Rural Banks  D) Reserve Bank of India (RBI) Answer: D) Reserve Bank of India (RBI) 2. What...

MCQ OF BANKING & FINANCIAL SERVICES (UNIT: 1 & 2) 1. Which of the following institutions is the central bank of India?  A) Commercial Banks  B) Cooperative Banks  C) Regional Rural Banks  D) Reserve Bank of India (RBI) Answer: D) Reserve Bank of India (RBI) 2. What is the minimum paid-up capital required for a bank to qualify as a scheduled bank under the RBI Act, 1934?  A) 1 lakh  B) 2 lakh  C) 5 lakh  D) 10 lakh Answer: C) 5 lakh 3. Which type of bank is not listed in the 2nd schedule of the RBI Act, 1934?  A) Scheduled Bank  B) Non-Scheduled Bank  C) Commercial Bank  D) Development Bank Answer: B) Non-Scheduled Bank 4. Which of the following is a primary function of commercial banks?  A) Bill Discounting  B) Overdraft Facility  C) Accepting Deposits  D) Agency Functions Answer: C) Accepting Deposits 5. Which type of bank focuses on providing finance to rural industries and agricultural activities?  A) Commercial Banks  B) Cooperative Banks  C) Development Banks  D) Regional Rural Banks Answer: B) Cooperative Banks Ms. Aditi Kachhia(Department of Vocational Studies) 6. What feature distinguishes co-operative banks from commercial banks?  A) Profit motive  B) Area of operation  C) Ownership by members  D) Variety of services Answer: C) Ownership by members 7. Regional Rural Banks (RRBs) were established under which Act?  A) Banking Regulation Act, 1949  B) Cooperative Societies Act, 1912  C) RRB Act, 1976  D) Banking Laws (Co-operative Societies) Act, 1965 Answer: C) RRB Act, 1976 8. Which of the following banks is eligible for loans from the RBI at bank rates?  A) Non-Scheduled Banks  B) Co-operative Banks  C) Scheduled Banks  D) Development Banks Answer: C) Scheduled Banks 9. Which of the following is NOT a feature of co-operative banks?  A) One Man One Vote  B) Profit Allocation  C) High Loan Interest Rates  D) Partial RBI Control Answer: C) High Loan Interest Rates 10. What is the primary objective of Regional Rural Banks (RRBs)?  A) Provide loans to large corporations  B) Support urban industries  C) Offer loans to rural and backward classes  D) Manage global investments Answer: C) Offer loans to rural and backward classes 11. Which type of bank provides financial assistance mainly for the development of rural areas and breaking down the monopoly of money lenders? Ms. Aditi Kachhia(Department of Vocational Studies)   A) Commercial Banks  B) Cooperative Banks  C) Regional Rural Banks  D) Development Banks Answer: B) Cooperative Banks 12. Which of the following is a secondary function of commercial banks?  A) Credit Creation  B) Accepting Deposits  C) Bill Discounting  D) Providing Loans Answer: C) Bill Discounting 13. Cooperative banks are primarily governed by which Act?  A) Banking Regulation Act, 1949  B) Cooperative Societies Act, 1912  C) RRB Act, 1976  D) Banking Laws (Co-operative Societies) Act, 1965 Answer: B) Cooperative Societies Act, 1912 14. What is the primary function of Regional Rural Banks (RRBs) concerning agricultural activities?  A) Granting loans for urban development  B) Providing short-term crop loans  C) Managing industrial investments  D) Offering global financial services Answer: B) Providing short-term crop loans 15. Which of the following is a key characteristic of a good banking system?  A) Focus on international trade  B) Modernization and flexibility  C) Solely profit-driven  D) Limited to large corporations Answer: B) Modernization and flexibility 16. What is the primary function of a financial system?  A) Distribute goods and services  B) Manage risks and allocate capital efficiently  C) Set government policies Ms. Aditi Kachhia(Department of Vocational Studies)   D) Control monetary supply Answer: B) Manage risks and allocate capital efficiently 17. Which role of the financial system involves channeling funds from savers to borrowers?  A) Mobilization of savings  B) Risk management  C) Intermediation  D) Price discovery Answer: C) Intermediation 18. What type of market facilitates the issuance of stocks and bonds to raise capital for businesses?  A) Money Market  B) Capital Market  C) Foreign Exchange Market  D) Derivatives Market Answer: B) Capital Market 19. Which of the following is a key function of financial markets?  A) Determine political stability  B) Facilitate long-term loans  C) Provide liquidity and price discovery  D) Set interest rates for savings accounts Answer: C) Provide liquidity and price discovery 20. What is the purpose of Treasury Bills?  A) To raise long-term capital for companies  B) To meet the short-term fund requirements of the government  C) To offer insurance coverage  D) To facilitate international trade Answer: B) To meet the short-term fund requirements of the government 21. Which financial instrument is described as an unsecured, short-term debt issued by corporations?  A) Certificate of Deposit  B) Commercial Paper  C) Call Money  D) Treasury Bill Ms. Aditi Kachhia(Department of Vocational Studies) Answer: B) Commercial Paper 22. What is the main focus of the money market?  A) Long-term investment in infrastructure  B) Short-term borrowing and lending  C) Risk management through derivatives  D) Trading of government securities Answer: B) Short-term borrowing and lending 23. Which financial market includes the buying and selling of government securities?  A) Corporate Securities Market  B) Long-Term Loans Market  C) Government Securities Market  D) Foreign Exchange Market Answer: C) Government Securities Market 24. What role does financial intermediation play in the financial system?  A) It dictates monetary policy  B) It connects surplus and deficit units  C) It determines interest rates for loans  D) It regulates the foreign exchange market Answer: B) It connects surplus and deficit units 25. Which of the following is NOT a characteristic of a financial market?  A) Facilitates capital formation  B) Manages and reduces risk  C) Provides a platform for trading financial instruments  D) Issues government currency Answer: D) Issues government currency 26. What type of financial market instrument is used by the central government to raise short-term funds?  A) Commercial Paper  B) Certificate of Deposit  C) Treasury Bill  D) Call Money Answer: C) Treasury Bill Ms. Aditi Kachhia(Department of Vocational Studies) 27. Which sector of the financial market deals with long-term loans for business expansion?  A) Money Market  B) Capital Market  C) Foreign Exchange Market  D) Government Securities Market Answer: B) Capital Market 28. What is the main purpose of risk management tools provided by financial systems?  A) To ensure capital gains  B) To mitigate risks associated with market uncertainties  C) To facilitate price discovery  D) To enhance liquidity Answer: B) To mitigate risks associated with market uncertainties 29. Which type of financial service includes asset management and hedge fund management?  A) Banking Services  B) Investment Services  C) Insurance Services  D) Foreign Exchange Services Answer: B) Investment Services 30. Which financial market instrument is characterized by its negotiability and high denomination, typically issued by commercial banks?  A) Treasury Bill  B) Commercial Paper  C) Certificate of Deposit  D) Call Money Answer: C) Certificate of Deposit Ms. Aditi Kachhia(Department of Vocational Studies)