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This set of Indian Economy Multiple Choice Questions & Answers (MCQs) focuses on Indian Banking System and Capital Market Set 2

Q1 | Which of the following best defines the term 'Letter of Credit' as used frequently inbank transactions? [SBI PO 1991]
  • An order from a bank to another bank abroad authorising the payment of a particular amount to a person named in the letter
  • An unconditional undertaking given by a bank ensuring the payment of a particular amount to the drawee at a given date
  • Letter by a bank to a person stating the terms and conditions of the loan sanctioned to him by the bank
  • Statement showing outstanding"- deposits and credits of a bank for a particular period
Q2 | In India, the bank NABARD does not provide refinance to : [CDS 2002]
  • Scheduled Commercial Banks
  • Regional Rural Banks
  • Export-Import Banks
  • State Land Development Banks
Q3 | Which of the following is called a 'banker's cheque' ? [CDS 2002]
  • Demand draft
  • Debit card
  • Pay order
  • Fixed deposit
Q4 | Bouncing of cheques has become an offence. What is the punishment for the same:
  • 6 months imprisonment
  • 1year imprisonment
  • 2 years imprisonment
  • 3 years imprisonment
Q5 | The difference between a bank and a non-banking financial institution (NBFI) is that: [IAS 1994]
  • a bank interacts directly with customers while an NBFI interacts with banks and governments
  • a bank indulges in a number of activities relating to finance with a range of customers, while an NBFI is , mainly concerned with the term loan needs of large enterprises
  • a bank deals with both internal and international customers while an NBFI is mainly concerned with the finances of foreign companies
  • a bank's main interest is to help in business transactions and saving/investment activities while an NBFl's main interest is in the stabilisation of the currency
Q6 | The main function of the Exim Bank is:
  • to help RBI in the regulation of foreign exchange
  • to prevent unlicensed transaction
  • to promote exports and curtail imports
  • to conserve foreign exchange
Q7 | The main difference between shares and debentures is :
  • debentures can only be issued after shares
  • shareholders receive dividend on shares whereas debenture holders receive interest on debentures
  • debentures can be partly converted into shares whereas shares cannot be converted into debentures
  • shareholders are the owners of the company whereas debenture holders are the creditors of the company
Q8 | In which year, some more commercial banks (in addition to the first lot of 14) werenationalised in India?
  • 1976
  • 1979
  • 1980
  • 1982
Q9 | Open market operations of a Central Bank are sale and purchase of:
  • foreign currencies
  • corporate securities
  • trade bills
  • government securities
Q10 | To prevent recurrence of scams in Indian Capital Market, the Government has assignedregulatory powers to: [IAS 1995]
  • RBI
  • SBI
  • SEBI
  • ICICI
Q11 | The place where bankers meet and settle their mutual claims and accounts is known as : [Bank PO 1993]
  • treasury
  • clearing House
  • collection Centre
  • dumping Ground
Q12 | The Imperial Bank of India, after nationalisation was given the name of:
  • Reserve Bank of India
  • Bank of India
  • State Bank of India
  • Indian Overseas Bank
Q13 | Regional Rural Banks are designed to work in which of the following ideals? [IAS 1988]
  • Work on basics of commercial banks
  • Help the targetted groups
  • Keep lending rates lower than cooperative institutions
  • Work on innovative and adaptive ideals
Q14 | If the cash-reserve ratio is lowered by the Central bank, what will be its effect oncredit creation?
  • Decrease
  • Increase
  • No change
  • None of these
Q15 | Which of the following is not an asset held by commercial banks?
  • Bills of exchange
  • Current account deposits
  • Credit balances with the Reserve Bank
  • Money lent at short notice
Q16 | The primary objective of Unit Trust of India is:
  • to assist the industries in financial difficulties
  • to diffuse the benefit of development among the masses
  • to accumulate funds for public investment expenditure
  • to promote the investment habit among those who have not been able to diversify investment risk
Q17 | Which of the following is now a punishable offence by a Bank Account holder ? [BankPO 1990]
  • If a cheque is not crossed
  • If a post-dated cheque is issued
  • If a cheque drawn by him is dishonoured for insufficiency of funds in his account
  • Issuing a cheque without signature
Q18 | Which of the following are the functions of the Central Bank of India? [Railways 1992] 1. Regulation of currency and flow of credit system 2. Maintaining exchange value of rupee 3. Formulating monetary policy of India 4. Supervisory powers over the indigenous bankers and leasing companies
  • 1 and 3
  • 1, 2 and 3
  • 1, 2 and 4
  • 1, 2, 3 and 4
Q19 | Which of the following are under the purview of Industrial Development Bank of India? 1. Unit Trust of India 2. Life Insurance Corporation of India 3. Export-Import Bank 4. State Finance Corporation of India
  • 1, 2 and 3
  • 2, 3 and 4
  • 1, 3 and4
  • 1, 2 and 4
Q20 | Which of the following constitute short-term sources of finance for small scaleindustries? 1. Private money lenders 2. Loans by commercial banks 3. Credit Guarantee schemes 4. National Small Industries Corporation
  • 1, 2 and 3
  • 1 only
  • 1, 2 and 4
  • 1, 2, 3 and 4
Q21 | Which of the following provides the largest part of the demand for loanable funds inIndia?
  • Farmers
  • Private-house purchasers
  • Corporate businesses
  • Hire-purchase borrowers
Q22 | A crossed cheque is one, which can be encashed only: [IFS 1991]
  • by the drawee
  • through a bank,
  • at the State Bank of India
  • after it has been transferred to another person
Q23 | Which one of the following Indian banks is not a nationalized bank? [IAS 2006]
  • Corporation Bank
  • Dena Bank
  • Federal bank
  • Vijaya Bank
Q24 | Which of the following is not an affiliate of the Reserve Bank of India?
  • Unit Trust of India
  • The Industrial Development Bank of India
  • Agricultural Refinance Corporation
  • Deposit Insurance Corporation
Q25 | The basic regulatory authority for mutual funds and stock markets lies with the:
  • Government of India
  • Reserve Bank of India
  • Securities and Exchange Board of India
  • Stock Exchanges