Q30. Why is a bank unable to recognise normal interest income from a non-performing loan?
[WBCS Mains 2014]
A. The loan fails asset-performance recognition criteria
B. The government mandates a universal zero interest rate
C. All bank deposits are cancelled
D. The loan becomes a share automatically
Answer: (A) The loan fails asset-performance recognition criteria
Explanation: When a loan becomes non-performing, interest recognition is normally suspended on an accrual basis and requires appropriate income treatment. This prevents banks from reporting income that has not been realised on distressed credit exposures.
Q29. When was the ₹1,000 banknote reintroduced in the modern series after its earlier withdrawal?
[WBCS Mains 2014]
A. October 2000
B. July 1991
C. August 1996
D. November 2005
Answer: (A) October 2000
Explanation: The high-denomination one-thousand-rupee banknote was reintroduced in October 2000 after an earlier demonetisation in 1978. Notes of that denomination were again withdrawn from legal-tender status in November 2016.
Q28. Which wider banking operation includes issuance and servicing of credit cards?
[WBCS Mains 2014]
A. Para-banking service
B. Only a currency printing function
C. Only government treasury collection
D. Not a financial service
Answer: (A) Para-banking service
Explanation: Credit cards are among fee-earning and ancillary services offered by banks, commonly described historically as para-banking activities. They provide payment convenience and revolving credit within agreed limits and relevant consumer-protection rules.
Q27. In which bank nationalisation wave was Punjab National Bank included?
[WBCS Mains 2014]
A. 1969
B. 1980
C. 1991
D. 2000
Answer: (A) 1969
Explanation: Punjab National Bank was one of fourteen major commercial banks nationalised in July 1969. This policy increased public ownership and reshaped financial intermediation, especially in rural and previously underserved areas.
Q26. A committee headed by Bimal Jalan assisted the RBI with which task relating to banking expansion?
[UPPSC Civil Services Paper 1 2014]
A. Reducing existing bad loans
B. Assessing new bank-licence applications
C. Framing microcredit rules
D. Studying mobile wallet use
Answer: (B) Assessing new bank-licence applications
Explanation: A Bimal Jalan-led external committee was associated with scrutinising applicants for new private-sector banking licences in 2013–14. This licence-screening task is distinct from the later committee on RBI economic capital arrangements.
Q25. If the demand for money rises while its supply is fixed, what usually happens to interest rates?
[UPSC CSE Prelims 2013]
A. They fall
B. They rise
C. They become zero
D. They cannot change
Answer: (B) They rise
Explanation: In a conventional liquidity-preference framework, higher desired money balances with an unchanged money stock exert upward pressure on the equilibrium interest rate. A higher interest rate encourages people to economise on non-interest-bearing cash balances.
Q24. In RBI terminology, what are open market operations?
[UPSC CSE Prelims 2013]
A. Banks borrowing overnight from RBI
B. Commercial-bank advances to industry
C. RBI purchases and sales of government securities
D. Any foreign trade transaction
Answer: (C) RBI purchases and sales of government securities
Explanation: Through open market operations, the RBI buys securities to supply funds to the market or sells securities to absorb liquidity. These transactions influence short-term monetary conditions and differ from commercial bank lending to firms.
Q23. Which sectors can fall within priority-sector lending?
[UPSC CSE Prelims 2013]
A. Agriculture only
B. Micro and small enterprises only
C. Weaker sections only
D. All three
Answer: (D) All three
Explanation: Priority-sector lending targets sectors that might otherwise receive inadequate institutional credit. Eligible categories include agriculture, smaller enterprises and weaker sections, among others. RBI prescribes the framework and applicable targets for banks.
Q22. Which method of financing economic development can create inflationary pressure through money creation?
[MPSC Rajyaseva GS I 2013]
A. Only progressive taxation
B. Only ordinary savings certificates
C. Deficit financing through monetary expansion
D. Only sale of existing government bonds to households
Answer: (C) Deficit financing through monetary expansion
Explanation: When public deficits are monetised, the central bank may create additional money to finance expenditure. If the resulting demand outpaces productive capacity, price pressures can follow. Inflation is not inevitable under every deficit-financing arrangement.
Q21. What was the underlying logic of the Lead Bank Scheme?
[UPSC CSE Prelims 2012]
A. Each bank must open a headquarters in every state
B. Banks should stop competing
C. A designated bank coordinates intensive banking development for each district
D. All deposits must be sent to RBI
Answer: (C) A designated bank coordinates intensive banking development for each district
Explanation: The scheme allots district-level coordination to a lead bank, which prepares and supports local credit plans with other financial institutions. The objective is geographic coverage, credit access and inclusive banking, not the elimination of competition.
