B.Com(H)- 5th Sem.

Unit-3rd
Monetary Theories and Institutions

Commercial Banks in India

History of the development of Indian Banking System

History of the development of Indian Banking System in Brief
The development of the Indian banking system can be traced back to
the early 18th century when the British East India Company established
three Presidency Banks in Calcutta, Bombay, and Madras. These
banks were primarily set up to facilitate the trading activities of the
British in India.
In the early 20th century, several Indian banks were established,
including the Allahabad Bank, Punjab National Bank, and Bank of India.
These banks were initially set up to cater to the needs of Indian
merchants and traders.
After India gained independence in 1947, the government nationalized
the Imperial Bank of India, which was renamed the State Bank of India
(SBI). This was followed by the nationalization of several other banks in
1969 and 1980, which led to the creation of a public sector banking
system in India.
In the 1990s, the Indian banking system underwent significant reforms,
including the introduction of new technologies, deregulation, and
liberalization. This led to the growth of private sector banks, foreign
banks, and non-banking financial institutions.
Today, the Indian banking system is divided into scheduled banks
(which are regulated by the Reserve Bank of India) and non-scheduled
banks. Scheduled banks are further classified into commercial banks
(which include public sector banks, private sector banks, and foreign
banks) and cooperative banks. The Indian banking system has come a
long way since its early days and has played a crucial role in the
development of the Indian economy.
Banks

Meaning

A bank is a financial institution that accepts deposits from customers

and uses those funds to provide loans, make investments, and engage
in other financial activities. Banks are typically regulated by government
authorities and are required to meet certain financial and operational
standards to ensure their safety and soundness. They are often
considered to be the backbone of a country's financial system,
providing essential services to individuals, businesses, and government
entities.

Definition
Banking is defined as “Accepting of deposits of money from public for the
purpose of Lending or Investment, repayable on demand or otherwise and
withdrawable by cheque, draft, or otherwise”

Classification of Banks

Banks can be classified in different ways based on various criteria. The

most common classifications of banks are:
1. Classification based on Ownership:

a. Public Sector Banks: These banks are owned and operated by the
government of the country. They are established with the objective of
promoting economic development and financial inclusion. Public sector
banks are also called nationalized banks in some countries, as the
government takes over the ownership and management of these
banks. Examples of public sector banks include State Bank of India,
Bank of Baroda, and Punjab National Bank in India.

b. Private Sector Banks: These banks are owned and operated by

private individuals or corporations. They are established with the
objective of making profits for their owners and shareholders. Private
sector banks are usually smaller in size compared to public sector
banks, but they are more efficient in their operations and offer better
customer service. Examples of private sector banks include HDFC
Bank, ICICI Bank, and Axis Bank in India.

c. Foreign Banks: These banks are owned and operated by foreign

entities. They are established with the objective of expanding their
reach in other countries and tapping into new markets. Foreign banks
often bring in new technologies and best practices from their home
countries, which can benefit the local economy. Examples of foreign
banks include Citibank, HSBC, and Standard Chartered Bank in India.

2. Classification based on the Function:

a. Commercial Banks: These banks primarily deal with deposits and

loans. They provide banking services to individuals and businesses,
including savings accounts, current accounts, fixed deposits, personal
loans, and business loans. Commercial banks also offer various
payment and transfer services, such as ATM services, digital banking,
and remittances. Examples of commercial banks include State Bank of
India, HDFC Bank, and Bank of America.
b. Investment Banks: These banks primarily deal with underwriting,
securities trading, and investment advisory services. They help
companies raise capital through public offerings of stocks and bonds
and also provide advisory services to clients on mergers and
acquisitions, corporate restructuring, and other strategic transactions.
Examples of investment banks include Goldman Sachs, Morgan
Stanley, and JP Morgan.

c. Development Banks: These banks primarily provide financial

assistance to promote economic development. They focus on providing
long-term financing for infrastructure projects, small and medium-sized
enterprise (SME) development, and rural development. Examples of
development banks include the International Finance Corporation (IFC),
the Asian Development Bank (ADB), and the World Bank.

d. Cooperative Banks: These banks are owned and operated by their

members or customers. They are established with the objective of
promoting mutual cooperation and financial inclusion. Cooperative
banks offer banking services to their members, who are usually from
the same community or profession. Examples of cooperative banks
include credit unions, agricultural cooperatives, and housing
cooperatives.

3. Classification based on the Services:

a. Retail Banks: These banks provide banking services to individuals
and small businesses. They offer a wide range of products and
services, including savings accounts, current accounts, personal loans,
credit cards, and mortgages. Retail banks also offer various payment
and transfer services, such as ATM services, digital banking, and
remittances. Examples of retail banks include Citibank, HDFC Bank,
and Wells Fargo.

b. Corporate Banks: These banks provide banking services to large

businesses and corporations. They offer a wide range of products and
services, including cash management, trade finance, foreign exchange,
and investment banking. Corporate banks also offer customized
financial solutions to their clients, such as syndicated loans, project
financing, and structured finance. Examples of corporate banks include
JP Morgan, Deutsche Bank, and Citigroup.

c. Investment Banks: These banks specialize in providing investment

banking services, such as underwriting and securities trading. They
help companies raise capital through public offerings of stocks and
bonds and also provide advisory services to clients on mergers and
acquisitions, corporate restructuring, and other strategic transactions.
Examples of investment banks include Goldman Sachs, Morgan
Stanley, and JP Morgan.

d. Universal Banks: These banks offer a wide range of financial

products and services, including retail banking, corporate banking, and
investment banking. They provide comprehensive financial solutions to
their clients, ranging from individuals to large corporations. Universal
banks also have a global presence and offer services in multiple
countries. Examples of universal banks include HSBC, Citigroup, and
Deutsche Bank.

4. Classification based on the Area of Operation:

a. Local Banks: These banks operate in a specific region or locality.

They offer banking services to customers in their local area and often
have a strong relationship with the local community. Local banks are
usually smaller in size compared to national or international banks but
offer better personalized service. Examples of local banks include
community banks and regional banks.

b. National Banks: These banks operate across the country. They

offer banking services to customers in multiple regions and have a
larger customer base compared to local banks. National banks are
usually larger in size and offer a wider range of products and services.
Examples of national banks include Bank of America, Wells Fargo, and
State Bank of India.

c. International Banks: These banks have a global presence and

operate in multiplecountries. They offer banking services to customers
in multiple countries and have a large customer base. International
banks are usually large in size and offer a wide range of products and
services, including corporate banking, investment banking, and wealth
management. Examples of international banks include HSBC,
Citigroup, and Standard Chartered Bank.

Functions of Banks
Banks perform various functions that can be broadly classified into
primary functions, secondary functions, and other functions. Here's a
breakdown of these functions:
1. Primary Functions:

a. Accepting Deposits: Banks accept deposits from individuals and

businesses, which can take the form of savings accounts, current
accounts, fixed deposits, and other types of accounts. These deposits
provide a source of funds that banks can use to make loans and
investments.

b. Providing Loans: Banks provide loans to individuals and

businesses, which can take the form of personal loans, business loans,
mortgages, and other types of loans. These loans provide a source of
funding for individuals and businesses to meet their financial needs.

2. Secondary Functions:

a. Facilitating Payments: Banks facilitate payments by providing

various services such as check clearing, wire transfers, and online
banking. These services enable individuals and businesses to transfer
funds quickly and securely.
b. Issuing Credit and Debit Cards: Banks issue credit and debit
cards, which enable individuals and businesses to make purchases and
payments without the need for cash.

c. Providing Foreign Exchange Services: Banks provide foreign

exchange services, which enable individuals and businesses to
exchange one currency for another.

d. Providing Investment Services: Banks provide investment services

such as brokerage, underwriting, and asset management. These
services enable individuals and businesses to invest their funds in a
variety of financial instruments.

3. Other Functions:

a. Providing Financial Advice: Banks provide financial advice to

individuals and businesses, which can include advice on investments,
retirement planning, and insurance.

b. Acting as Trustees: Banks act as trustees for individuals and

businesses, managing assets on their behalf and providing fiduciary
services.

c. Providing Safe Deposit Boxes: Banks provide safe deposit boxes,

which enable individuals and businesses to store valuable items
securely.
d. Providing ATM Services: Banks provide ATM services, which
enable individuals to withdraw cash, check account balances, and
perform other banking transactions.

Overall, banks perform a variety of functions that are essential to the

functioning of modern economies.

Importance of Banks
Banks play a crucial role in the functioning of modern economies and
their importance can be seen in several ways:
1.Mobilization and Allocation of Savings: Banks provide a safe and
convenient way for individuals and businesses to save and invest their
money. They mobilize these savings and allocate them to borrowers,
who use the funds to finance their businesses and investments. This
process of mobilizing and allocating savings is essential for economic
growth and development.
2.Facilitation of Transactions: Banks facilitate transactions by
providing a range of payment and transfer services. These services
enable individuals and businesses to make payments and transfer
funds quickly and securely, without the need for cash.

3.Provision of Credit: Banks provide credit to individuals and

businesses, which enables them to finance their operations, purchase
assets, and invest in new projects. This credit creation process is
essential for economic growth and job creation.
4.Promotion of Financial Inclusion: Banks play an important role in
promoting financial inclusion by providing banking services to
individuals and businesses that would otherwise not have access to
these services. This helps to reduce poverty and inequality and
promotes economic development.

5.Promotion of Economic Stability: Banks help to promote economic

stability by providing a range of financial services that help to mitigate
risks and manage economic fluctuations. Banks also play a key role in
regulating the money supply and controlling inflation.

6.Provision of Investment Services: Banks provide investment

services such as brokerage, underwriting, and asset management.
These services enable individuals and businesses to invest their funds
in a variety of financial instruments, which helps to diversify their
portfolios and manage risk.

Overall, banks are essential to the functioning of modern economies

and play a key role in promoting economic growth, financial stability,
and financial inclusion.

Process of Credit Creation by Banks

Credit creation is the process by which banks create new money
through the issuance of loans. Here's a simplified explanation of how
this process works:
1. Banks receive deposits from customers, which they hold as
reserves.
 2. Banks are required to maintain a certain percentage of their
deposits as reserves with the central bank, which is known as the
reserve requirement.
3. Banks use the remaining deposits to make loans to individuals
and businesses.
4. When a bank makes a loan, it creates new money by crediting the
borrower's account with the loan amount.
5. The borrower can then use this new money to make purchases,
which in turn creates deposits in other banks.
6. These deposits can then be used by other banks to make loans,
which creates new money and expands the money supply.
7. The process of credit creation continues as long as there is
demand for loans and banks have sufficient reserves to meet the
reserve requirement.

The process of credit creation by banks can be explained using

the following formula:
MC = (1/RR) x ER
Where,
MC = Maximum amount of credit that can be created by a bank
RR = Reserve Ratio
ER = Excess Reserves
The formula shows that the maximum amount of credit that a bank can
create is determined by the reserve ratio and the amount of excess
reserves that the bank holds. The reserve ratio is the percentage of
deposits that a bank is required to hold as reserves. The excess
reserves are the funds that a bank holds in excess of the reserve
requirement.
For example,
if the required reserve ratio is 10% and a bank has Rs. 1,00,000 in
excess reserves, the maximum amount of credit that can be created by
the bank is:

Credit creation = (1/0.1) x 1,00,000

Credit creation = Rs.10,00,000

This means that the bank can create up to Rs.10,00,000 in new loans
based on the excess reserves it holds. However, the actual amount of
credit created by the bank will depend on various factors such as the
demand for loans, the creditworthiness of borrowers, and the bank's
lending policies.

Reserve Bank of India

Introduction:
The Reserve Bank of India (RBI) is the central bank of India, which was
established on April 1, 1935, under the Reserve Bank of India Act,
1934. The RBI is responsible for regulating the monetary policy of India
and maintaining the stability of the country's financial system.

The RBI is governed by a central board of directors, which is appointed

by the government of India. The board is responsible for formulating
monetary policy, regulating banks and financial institutions, managing
foreign exchange reserves, and issuing currency.

Functions of Reserve Bank of India

The functions of the Reserve Bank of India (RBI) can be broadly

classified into the following categories:
1. Monetary Functions:

a. Formulation and Implementation of Monetary Policy: The RBI is

responsible for formulating and implementing monetary policy in India.
It sets interest rates, reserve requirements, and other policy tools to
control inflation and promote economic growth.
b. Regulation of the Money Supply and Credit: The RBI regulates
the money supply and credit in the economy through various policy
tools, such as open market operations, reserve requirements, and
interest rates.
c. Conducting Research on Economic and Monetary Issues: The
RBI conducts research on economic and monetary issues to inform its
policy decisions.

2. Banking Functions:

a. Licensing and Regulation of Banks and other Financial

Institutions: The RBI is responsible for licensing and regulating banks
and other financial institutions in India to ensure their safety and
soundness.
b. Supervision and Inspection of Banks and other Financial
Institutions: The RBI supervises and inspects banks and other
financial institutions to ensure compliance with laws and regulations.
c. Provision of Banking Facilities to the Government: The RBI
provides banking facilities to the government, such as managing
government accounts and issuing government securities.

3. Financial Markets Functions:

a. Development and Regulation of Financial Markets: The RBI is

responsible for developing and regulating financial markets in India,
including money, capital, and foreign exchange markets.
b. Promotion of Financial Inclusion and Literacy: The RBI promotes
financial inclusion and literacy through various initiatives, such as
financial education programs and the promotion of digital payments.
c. Management of Foreign Exchange Reserves and Exchange
Rate: The RBI manages the foreign exchange reserves of India and the
exchange rate of the rupee.

4. Other Functions:

a. Printing and Distribution of Currency Notes and Coins: The RBI

is responsible for printing and distributing currency notes and coins in
India.
b. Acting as an Adviser to the Government: The RBI acts as an
adviser to the government on economic and financial issues.
c. Conducting and Promoting Research on Economic and
Financial Issues: The RBI conducts and promotes research on
economic and financial issues to inform policy decisions.

Overall, the Reserve Bank of India plays a critical role in ensuring the
stability and efficiency of India's financial system, as well as promoting
economic growth and development.

Credit Control Policy of RBI

The Reserve Bank of India (RBI) uses various credit control policies to
regulate the money supply in the economy and maintain price stability.
The key credit control policies used by the RBI are:

1. Quantitative tools: These are measures that directly affect the

quantity of credit in the economy. The RBI uses the following
quantitative tools:

I) Bank rate: The bank rate is the rate of interest at which the RBI
lends money to commercial banks. An increase in the bank rate makes
borrowing from the RBI more expensive, which reduces the supply of
credit in the economy. Conversely, a decrease in the bank rate makes
borrowing from the RBI cheaper, which increases the supply of credit in
the economy.

II) Cash reserve ratio (CRR): The CRR is the percentage of deposits
that banks are required to keep with the RBI as reserves. An increase
in the CRR reduces the amount of money that banks can lend, which
reduces the supply of credit in the economy. Conversely, a decrease in
the CRR increases the amount of money that banks can lend, which
increases the supply of credit in the economy.

III) Statutory liquidity ratio (SLR): The SLR is the percentage of

deposits that banks are required to maintain in the form of liquid assets
such as government securities. An increase in the SLR reduces the
amount of money that banks can lend, which reduces the supply of
credit in the economy. Conversely, a decrease in the SLR increases the
amount of money that banks can lend, which increases the supply of
credit in the economy.

2. Qualitative tools: These are measures that indirectly affect the

quantity of credit in the economy by influencing the behavior of banks
and borrowers. The RBI uses the following qualitative tools:

I) Credit rationing: The RBI can restrict the amount of credit that
banks can lend to certain sectors or industries to control the flow of
credit in the economy.

II) Moral suasion: The RBI can use moral suasion to influence the
behavior of banks and borrowers by issuing guidelines and directives.

Overall, the credit control policies of the RBI are aimed at maintaining
price stability, promoting economic growth, and ensuring the stability of
the financial system.
Monetary Policy of RBI
The monetary policy of the Reserve Bank of India (RBI) is aimed at
achieving price stability and promoting economic growth. The RBI uses
various policy tools to regulate the money supply in the economy and
control inflation. The key components of the RBI's monetary policy are:
1. Repo Rate: This is the rate at which the RBI lends money to
commercial banks. An increase in the repo rate makes borrowing more
expensive for banks, which in turn reduces their ability to lend money to
businesses and individuals. This helps to control inflation by reducing
the money supply in the economy.

2. Reverse Repo Rate: This is the rate at which banks can lend money
to the RBI. An increase in the reverse repo rate makes it more
attractive for banks to lend money to the RBI, which reduces the
amount of money available for lending to businesses and individuals.
This helps to control inflation by reducing the money supply in the
economy.

3. Cash Reserve Ratio (CRR): This is the percentage of deposits that

banks are required to hold with the RBI as reserves. An increase in the
CRR reduces the amount of money that banks can lend, which helps to
control inflation.

4. Statutory Liquidity Ratio (SLR): This is the percentage of deposits

that banks are required to invest in government securities. An increase
in the SLR reduces the amount of money that banks can lend, which
helps to control inflation.
5. Open Market Operations (OMO): This involves the buying and
selling of government securities by the RBI in the open market. When
the RBI buys government securities, it injects money into the economy,
which can help to stimulate economic growth. When the RBI sells
government securities, it reduces the money supply in the economy,
which can help to control inflation.

6. Liquidity Adjustment Facility (LAF): This is a mechanism through

which banks can borrow money from the RBI to meet their short-term
liquidity needs. The LAF comprises the repo rate and the reverse repo
rate.

The RBI uses a combination of these policy tools to achieve its

monetary policy objectives. For example, during periods of high
inflation, the RBI may increase the repo rate, CRR, and SLR, and sell
government securities through OMO to reduce the money supply in the
economy and control inflation. Conversely, during periods of low
economic growth, the RBI may reduce the repo rate and CRR to
increase the money supply in the economy and stimulate economic
activity.
Overall, the monetary policy of the RBI plays a critical role in
maintaining price stability and promoting economic growth in India.

Regional Rural Banks [RRBs]

The Regional Rural Banks (RRBs) in India were established in 1976
with the aim of providing banking services to the rural population and
promoting rural development. RRBs are jointly owned by the Central
Government, the State Government, and a Sponsor Bank. Here are the
functions and working of RRBs:

Functions of RRBs:

1. Providing banking facilities: RRBs provide banking facilities such

as deposit accounts, loans, and other financial services to the rural
population.

2. Promoting rural development: RRBs provide financial assistance

to rural industries, small businesses, and other priority sectors in rural
areas to promote rural development.

3. Mobilizing deposits: RRBs mobilize deposits from rural areas and

promote savings habits among rural people.

4. Promoting financial inclusion: RRBs provide banking services to

people in rural areas who may not have access to traditional banking
services, thereby promoting financial inclusion.

5. Providing remittance services: RRBs offer remittance services to

rural people, allowing them to send and receive money from other parts
of the country or abroad.

Working of RRBs:
1. Ownership: RRBs are jointly owned by the Central Government, the
State Government, and a Sponsor Bank. The Sponsor Bank provides
financial and managerial support to the RRB.

2. Management: The management of RRBs is carried out by a Board

of Directors, which is appointed by the Sponsor Bank in consultation
with the Central Government and the State Government.

3. Operations: RRBs carry out their operations through a network of

branches in rural areas. The branches are equipped with modern
banking facilities such as core banking solutions, internet banking, and
mobile banking.

4. Funding: RRBs receive funding from various sources, including

deposits mobilized from rural areas, loans from the Sponsor Bank, and
grants from the Central Government and the State Government.

5. Regulations: RRBs are regulated by the Reserve Bank of India

(RBI) and are subject to various regulations and guidelines issued by
the RBI from time to time.

Overall, RRBs play a crucial role in promoting rural development and

financial inclusion in India. They provide banking services to people in
rural areas and help to promote economic growth and development in
rural India.

National Bank for Agriculture and Rural

Development [NABARD]
The National Bank for Agriculture and Rural Development (NABARD) is
an apex development bank in India that was established in 1982 with
the aim of promoting rural development and agriculture. Here are the
functions and working of NABARD:

Functions of NABARD:

1. Providing refinance: NABARD provides refinance facilities to banks

and other financial institutions that lend to the agricultural sector and
rural areas.

2. Promoting rural development: NABARD promotes rural

development by providing financial assistance to rural industries, small
businesses, and other priority sectors in rural areas.

3. Providing technical assistance: NABARD provides technical

assistance to rural development projects and schemes, including
training programs for farmers and rural entrepreneurs.

4. Promoting research and development: NABARD promotes

research and development in the agriculture and rural sectors, and
supports innovative ideas and technologies that can benefit rural
people.

5. Providing investment support: NABARD provides investment

support for various projects related to agriculture and rural
development, such as irrigation, watershed development, and rural
infrastructure.

Working of NABARD:

1. Ownership: NABARD is owned by the Government of India and is

governed by a Board of Directors, which is appointed by the
Government of India.

2. Management: The management of NABARD is carried out by a

team of professionals who are appointed by the Board of Directors.

3. Operations: NABARD carries out its operations through a network of

regional offices and branches across the country. It provides various
financial and technical services to the rural population and agriculture
sector.

4. Funding: NABARD raises funds from various sources, including the

Government of India, multilateral agencies, and the market. It then
provides refinance facilities to banks and other financial institutions that
lend to the agriculture and rural sectors.

5. Regulations: NABARD is regulated by the Reserve Bank of India

(RBI) and is subject to various regulations and guidelines issued by the
RBI from time to time.

Overall, NABARD plays a crucial role in promoting rural development

and agriculture in India. It provides financial and technical support to
various projects and schemes related to rural development and
agriculture, and helps to promote economic growth and development in
rural India.

E-Banking
E-Banking, also known as electronic banking or online banking, refers
to the use of digital technologies to carry out banking transactions and
services. E-Banking allows customers to access banking services and
perform transactions from anywhere in the world, using a computer or
mobile device with an internet connection. Here are some of the
features and benefits of E-Banking:

Features of E-Banking:

1. Account management: Customers can manage their bank

accounts, view account balances, and transaction history.

2. Fund transfers: Funds can be transferred between accounts, to

other banks, or to other individuals using online banking.

3. Bill payments: Customers can pay bills online, set up automatic

payments, and view payment history.

4. Mobile banking: Customers can access banking services using a

mobile device, such as a smartphone or tablet.

5. Card management: Customers can manage their debit or credit

cards, block or activate them, and view transaction history.

Benefits of E-Banking:

1. Convenience: E-Banking allows customers to access banking

services from anywhere at any time, without the need to visit a bank
branch.

2. Time-saving: E-Banking saves time as transactions can be

completed quickly and easily, without the need to fill out forms or wait in
line.

3. Cost-saving: E-Banking eliminates the need for paper-based

transactions, reducing costs for both customers and banks.
4. Safety and security: E-Banking uses advanced security measures
to protect customer data and transactions, making it safer than
traditional banking methods.

5. Access to information: E-Banking provides customers with

real-time access to their account information, making it easier to
manage finances and make informed decisions.

Overall, E-Banking is an efficient and convenient way for customers to

access banking services and carry out transactions, and it is becoming
increasingly popular with the rise of digital technologies and online
connectivity.

_______________________________________________________

Important Questions
1. What do you mean by a Bank? Explain
classification of Banks in detail.
2. What do you mean by a Bank? Give various
functions of Banks in detail.
3. What do you mean by a Bank? Explain the
importance of Banks.
4. Explain the process of credit creation by
Banks.
5. What do you mean by the Reserve Bank of
India ? Explain its functions.
6. Explain the credit control policy of the Reserve
Bank of India.
7. Explain the Monetary Policy of the Reserve
Bank of India.
8. Write a note on function and working of
Regional Rural Banks [RRBs] .
 9. Write a note on function and working of
National Bank for Agriculture and Rural
Development [NABARD] .
10. What do you mean by E-Banking? Give its
features. Explain various benefits of E-Banking.
____________________________________________

MCQS

1. What is the full form of ATM?

a) Automated Teller Machine
b) Automated Transaction Machine
c) Automatic Teller Machine
d) All of the above

Answer: a) Automated Teller Machine

2. What is the full form of NEFT?

a) National Electronic Fund Transfer
b) National Electronic Financial Transfer
c) National Electronic Fund Transaction
d) None of the above

Answer: a) National Electronic Fund Transfer

3. Which bank is known as the "Banker to the Banks" in India?

a) Reserve Bank of India
b) State Bank of India
c) Punjab National Bank
d) HDFC Bank

Answer: a) Reserve Bank of India

4. Which bank has the largest network of ATMs in India?

a) State Bank of India
b) ICICI Bank
c) HDFC Bank
d) Axis Bank

Answer: a) State Bank of India

5. Which bank was the first to introduce internet banking in India?

a) ICICI Bank
b) HDFC Bank
c) State Bank of India
d) Axis Bank

Answer: b) HDFC Bank

6. Which bank is known as the "Blue Bank" in India?

a) ICICI Bank
b) Axis Bank
c) HDFC Bank
d) IndusInd Bank

Answer: c) HDFC Bank

7. Which bank has the tagline "Relationship beyond banking"?

a) ICICI Bank
b) HDFC Bank
c) Axis Bank
d) Kotak Mahindra Bank

Answer: d) Kotak Mahindra Bank

8. Which bank is the largest private sector bank in India by assets?

a) ICICI Bank
b) HDFC Bank
c) Axis Bank
d) Kotak Mahindra Bank

Answer: b) HDFC Bank

9. Which bank was nationalized in 1969 along with 13 other banks in

India?
a) State Bank of India
b) Punjab National Bank
c) Bank of Baroda
d) Canara Bank

Answer: b) Punjab National Bank

10. Which bank is the oldest commercial bank in India?

a) State Bank of India
b) Punjab National Bank
c) Bank of India
d) Allahabad Bank

Answer: d) Allahabad Bank

11. Which of the following is not a public sector bank in India?

a) State Bank of India
b) Punjab National Bank
c) HDFC Bank
d) Bank of Baroda

Answer: c) HDFC Bank

12. Which bank is known as the "Bank of the Nation" in India?

a) State Bank of India
b) Punjab National Bank
c) Bank of India
d) Canara Bank

Answer: a) State Bank of India

13. Which bank was the first to introduce mobile banking in India?
a) ICICI Bank
b) HDFC Bank
c) Axis Bank
d) State Bank of India

Answer: d) State Bank of India

14. Which bank is known as the "Aapka Bhala, Sabki Bhalai" bank in
India?
a) ICICI Bank
b) HDFC Bank
c) Axis Bank
d) IDFC First Bank

Answer: b) HDFC Bank

15. Which bank was founded by the famous industrialist GD Birla?

a) ICICI Bank
b) HDFC Bank
c) Axis Bank
d) United Bank of India

Answer: d) United Bank of India

16. Which bank is known as the "Young Bank" in India?

a) IDFC First Bank
b) Bandhan Bank
c) RBL Bank
d) Yes Bank

Answer: b) Bandhan Bank

17. Which bank was the first to introduce credit cards in India?
a) ICICI Bank
b) HDFC Bank
c) Axis Bank
d) SBI Cards

Answer: a) ICICI Bank

18. Which bank is known as the "Banker to Every Indian" in India?

a) State Bank of India
b) Punjab National Bank
c) HDFC Bank
d) ICICI Bank

Answer: a) State Bank of India

19. Which bank was founded by the famous industrialist Lala Lajpat
Rai?
a) Punjab National Bank
b) Bank of Baroda
c) Canara Bank
d) Indian Bank

Answer: a) Punjab National Bank

20. Which bank is known as the "Good People to Bank with" in India?
a) IDFC First Bank
b) RBL Bank
c) Yes Bank
d) Kotak Mahindra Bank

Answer: b) RBL Bank

21. What is the full form of RBI?

a) Reserve Bank of India
b) Reserve Banking Institution
c) Reserve Board of India
d) None of the above

Answer: a) Reserve Bank of India

22. When was the Reserve Bank of India established?

a) 1947
b) 1935
c) 1950
d) 1969

Answer: b) 1935

23. Who is the current Governor of RBI?

a) Shaktikanta Das
b) Raghuram Rajan
c) Urjit Patel
d) Duvvuri Subbarao

Answer: a) Shaktikanta Das

24. Which of the following is not a function of RBI?

a) Issuing currency notes
b) Regulating the credit system
c) Conducting monetary policy
d) Regulating the stock market

Answer: d) Regulating the stock market

25. What is the primary objective of RBI?

a) Promoting economic growth
b) Maintaining price stability
c) Promoting financial inclusion
d) All of the above

Answer: b) Maintaining price stability

26. Which committee recommended the establishment of RBI?

a) Hilton Young Commission
b) FSLRC Committee
c) Narasimham Committee
d) None of the above

Answer: a) Hilton Young Commission

27. Which of the following is not a monetary policy tool used by RBI?
a) CRR
b) SLR
c) Repo rate
d) Fiscal deficit

Answer: d) Fiscal deficit

28. What is the current CRR rate in India?

a) 3%
b) 4%
c) 5%
d) 6%

Answer: b) 4%

29. Which of the following is not a subsidiary of RBI?

a) National Housing Bank
b) Bharatiya Reserve Bank Note Mudran Private Limited
c) Securities and Exchange Board of India
d) Deposit Insurance and Credit Guarantee Corporation

Answer: c) Securities and Exchange Board of India

30. What is the current repo rate in India?

a) 4%
b) 5%
c) 6%
d) 7%

Answer: b) 5%

31. When were Regional Rural Banks (RRBs) established in India?

a) 1969
b) 1975
c) 1980
d) 1991

Answer: c) 1980

32. What is the minimum and maximum shareholding of the Central

Government in RRBs?
a) Minimum 50%, Maximum 100%
b) Minimum 30%, Maximum 60%
c) Minimum 10%, Maximum 50%
d) None of the above

Answer: c) Minimum 10%, Maximum 50%

33. What is the primary objective of RRBs?

a) Providing credit facilities to rural areas
b) Providing investment opportunities to urban areas
c) Providing housing loans to urban areas
d) All of the above

Answer: a) Providing credit facilities to rural areas

34. How many RRBs are currently functioning in India?
a) 45
b) 56
c) 64
d) 72

Answer: c) 64

35. What is the current interest rate offered by RRBs on fixed deposits?
a) 5-6%
b) 6-7%
c) 7-8%
d) 8-9%

Answer: b) 6-7%

36. Which of the following is not a sponsor bank of RRBs?

a) State Bank of India
b) Punjab National Bank
c) Bank of Baroda
d) HDFC Bank

Answer: d) HDFC Bank

37. What is the minimum and maximum age limit for a person to
become a customer of RRBs?
a) Minimum 18 years, Maximum 60 years
b) Minimum 21 years, Maximum 65 years
c) Minimum 16 years, Maximum 70 years
d) None of the above

Answer: b) Minimum 21 years, Maximum 65 years

38. What is the current interest rate offered by RRBs on savings

accounts?
a) 2-3%
b) 3-4%
c) 4-5%
d) 5-6%
Answer: b) 3-4%

39. Which of the following is not a service offered by RRBs?

a) Insurance
b) Mutual funds
c) Credit cards
d) Debit cards

Answer: c) Credit cards

40. Which of the following is the first RRB to be established in India?

a) Prathama Bank
b) Baroda Uttar Pradesh Gramin Bank
c) Allahabad UP Gramin Bank
d) Grameen Bank

Answer: a) Prathama Bank

41. What is the full form of NABARD?

a) National Agriculture and Rural Development Bank
b) National Bank for Agriculture and Rural Development
c) National Agriculture and Rural Development Bureau
d) None of the above

Answer: b) National Bank for Agriculture and Rural Development

42. When was NABARD established?

a) 1947
b) 1969
c) 1982
d) 1991

Answer: c) 1982

43. What is the primary objective of NABARD?

a) Providing credit facilities to urban areas
b) Providing investment opportunities to rural areas
c) Providing credit facilities to agriculture and rural sectors
d) All of the above
Answer: c) Providing credit facilities to agriculture and rural sectors

44. Which of the following is not a function of NABARD?

a) Providing refinance facilities to rural banks
b) Promoting rural development through various schemes and
initiatives
c) Regulating the credit system in urban areas
d) Providing financial assistance to rural sectors

Answer: c) Regulating the credit system in urban areas

45. What is the current interest rate offered by NABARD on long-term

loans?
a) 6-7%
b) 7-8%
c) 8-9%
d) 9-10%

Answer: b) 7-8%

46. Which of the following is not a subsidiary of NABARD?

a) National Housing Bank
b) Small Industries Development Bank of India
c) Bharatiya Reserve Bank Note Mudran Private Limited
d) None of the above

Answer: c) Bharatiya Reserve Bank Note Mudran Private Limited

47. What is the minimum and maximum shareholding of the Central

Government in NABARD?
a) Minimum 50%, Maximum 100%
b) Minimum 30%, Maximum 60%
c) Minimum 10%, Maximum 50%
d) None of the above

Answer: a) Minimum 50%, Maximum 100%

8. What is the current interest rate offered by NABARD on short-term

4loans?
a) 5-6%
b) 6-7%
c) 7-8%
d) 8-9%

Answer: c) 7-8%

49. Which of the following is not a scheme or initiative launched by

NABARD?
a) SHG Bank Linkage Programme
b) Rural Infrastructure Development Fund
c) National Rural Livelihood Mission
d) National Pension Scheme

Answer: d) National Pension Scheme

50. Which of the following is not a type of loan offered by NABARD?

a) Long-term loans
b) Short-term loans
c) Personal loans
d) Medium-term loans

Answer: c) Personal loans

51. What is E-Banking?

a) Banking using electronic devices
b) Banking using physical devices
c) Banking using mobile devices
d) None of the above

Answer: a) Banking using electronic devices

52. Which of the following is not a type of E-Banking?

a) Internet banking
b) Mobile banking
c) Branch banking
d) ATM banking

Answer: c) Branch banking

53. Which of the following is not a benefit of E-Banking?

a) Convenience
b) Time-saving
c) Cost-saving
d) Increased human interaction

Answer: d) Increased human interaction

54. Which of the following is not a security measure in E-Banking?

a) Password protection
b) Two-factor authentication
c) Malware protection
d) Sharing passwords with others

Answer: d) Sharing passwords with others

55. What is the full form of OTP in E-Banking?

a) Online Transaction Password
b) One-Time Password
c) Offline Transaction Password
d) None of the above

Answer: b) One-Time Password

56. Which of the following is not a feature of Internet banking?

a) Account balance enquiry
b) Fund transfer
c) Cash withdrawal
d) Bill payment

Answer: c) Cash withdrawal

57. What is the maximum amount that can be withdrawn from an ATM
in a day?
a) Rs. 10,000
b) Rs. 20,000
c) Rs. 40,000
d) Rs. 50,000

Answer: c) Rs. 40,000

58. Which of the following is not a type of mobile banking?
a) SMS banking
b) USSD banking
c) App-based banking
d) Desktop-based banking

Answer: d) Desktop-based banking

59. Which of the following is not a disadvantage of E-Banking?

a) Cybersecurity risks
b) Technical glitches
c) Lack of human interaction
d) Availability only during banking hours

Answer: d) Availability only during banking hours

60. What is the full form of NEFT in E-Banking?

a) National Electronic Funds Transfer
b) National Electronic Financial Transaction
c) National Electronic Fund Transfer
d) None of the above

Answer: a) National Electronic Funds Transfer

61. What is credit creation?

a) The process of creating money by commercial banks
b) The process of creating money by the government
c) The process of creating money by central banks
d) None of the above

Answer: a) The process of creating money by commercial banks

62. Which of the following is not a factor affecting credit creation?

a) Cash reserve ratio
b) Statutory liquidity ratio
c) Foreign exchange reserves
d) Bank rate

Answer: c) Foreign exchange reserves

63. What is the formula for calculating maximum credit creation?
a) Maximum credit creation = Deposits x Cash reserve ratio
b) Maximum credit creation = Deposits x Statutory liquidity ratio
c) Maximum credit creation = Deposits x Bank rate
d) None of the above

Answer: a) Maximum credit creation = Deposits x Cash reserve ratio

64. Which of the following is not a method of credit creation?

a) Loans and advances
b) Overdrafts
c) Credit cards
d) Stock market investments

Answer: d) Stock market investments

65. What is the impact of an increase in cash reserve ratio on credit

creation?
a) Increases credit creation
b) Decreases credit creation
c) Has no impact on credit creation
d) None of the above

Answer: b) Decreases credit creation

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