Chapter 16: Financial Inclusion and Financial Literacy (JAIIB – Paper 2)

1. Which of the following is a key objective of Financial Inclusion in India?

• A. Increase corporate profits
• B. Promote foreign trade
• C. Provide affordable financial services to weaker sections
• D. Control fiscal deficit

Financial Inclusion aims at providing access to affordable financial products like savings, credit, remittance, insurance, and pension to disadvantaged and low-income groups.

2. Business Correspondent (BC) model under Financial Inclusion is primarily meant to:

• A. Extend banking services in unbanked and remote areas
• B. Increase foreign investment in banks
• C. Promote only digital lending
• D. Replace bank branches

The BC model allows banks to engage local agents for providing banking services in areas where opening full-fledged branches is not viable.

3. Which initiative launched in 2014 is a major step in expanding Financial Inclusion in India?

• A. Lead Bank Scheme
• B. Self Help Group – Bank Linkage Programme
• C. Business Facilitator Model
• D. Pradhan Mantri Jan Dhan Yojana (PMJDY)

PMJDY was launched in 2014 to ensure access to banking, savings, insurance, and pension services for all households.

4. A villager wants to open a savings account but lives 20 km away from the nearest bank branch. Which option under Financial Inclusion can best serve him?

• A. ATM services
• B. Business Correspondent (BC) outlet
• C. Foreign bank branch
• D. Only mobile app-based account

BC outlets serve as mini-branches in remote areas and provide services like account opening, deposits, withdrawals, and remittances.

5. Which of the following services is NOT typically covered under Financial Inclusion initiatives?

• A. Basic savings account
• B. Small-value credit and remittance
• C. High-value investment advisory
• D. Micro-insurance

Financial Inclusion is meant for basic and affordable financial services. High-value investment advisory is not its objective.

6. Mobile banking in Financial Inclusion primarily helps in:

• A. Providing banking access without the need for physical branches
• B. Reducing RBI’s monetary policy operations
• C. Eliminating the need for ATMs
• D. Controlling inflation

Mobile banking enables customers to access savings, transfers, and payments remotely, helping banks serve unbanked areas without setting up branches.

7. Which of the following is a key advantage of using tablets by Business Correspondents (BCs)?

• A. They allow RBI to track inflation directly
• B. They replace all manual KYC requirements
• C. They ensure 24x7 ATM services
• D. They help in capturing e-KYC details and instant account opening

Tablets with biometric and internet connectivity enable BCs to carry out e-KYC and instantly open accounts in remote areas.

8. UPI-based mobile payments have contributed to Financial Inclusion mainly by:

• A. Facilitating high-value stock market trading
• B. Allowing instant low-cost digital payments for all
• C. Replacing foreign exchange transactions
• D. Providing government subsidies only

UPI allows customers to make instant, low-value payments digitally at zero or minimal cost, supporting financial access for the masses.

9. In villages where bank branches are absent, how do mobile-enabled BCs strengthen Financial Inclusion?

• A. By providing direct loans from RBI
• B. By ensuring government sets up ATMs
• C. By offering services like deposits, withdrawals, and remittances using handheld devices
• D. By providing only insurance products

Mobile-enabled BCs use handheld devices/tablets to provide essential banking services like deposits, withdrawals, fund transfers, and Aadhaar-based transactions in unbanked areas.

10. Which regulatory measure by RBI promoted the use of mobile banking in Financial Inclusion?

• A. Basel III guidelines
• B. Allowing Aadhaar-based e-KYC and simplified mobile banking transactions
• C. Setting Cash Reserve Ratio (CRR)
• D. Introducing Priority Sector Lending (PSL)

RBI’s simplified e-KYC norms and relaxation in mobile banking transaction rules made it easier for people to open accounts and use financial services digitally.

11. What is the main objective of Financial Literacy?

• A. To increase bank profits
• B. To reduce CRR requirements
• C. To promote foreign exchange transactions
• D. To educate individuals on effective use of financial products and services

Financial Literacy aims at empowering people with knowledge about savings, credit, insurance, digital banking, and responsible money management.

12. Which of the following is an initiative of RBI for promoting Financial Literacy?

• A. Financial Literacy Centres (FLCs)
• B. Digital India campaign
• C. Make in India scheme
• D. National Highway Development Project

RBI mandated banks to set up Financial Literacy Centres (FLCs) to spread awareness about financial products and services, especially in rural areas.

13. The National Centre for Financial Education (NCFE) is promoted jointly by:

• A. NABARD and SIDBI
• B. RBI, SEBI, IRDAI, and PFRDA
• C. Ministry of Finance and IBA
• D. World Bank and IMF

NCFE was set up jointly by RBI, SEBI, IRDAI, and PFRDA to implement financial education policies and conduct awareness programs.

14. A customer falls into a debt trap due to taking multiple loans without understanding repayment obligations. This indicates:

• A. High financial inclusion
• B. Strong banking regulation
• C. Low financial literacy
• D. Good financial planning

Lack of financial literacy often leads to poor borrowing decisions and over-indebtedness, highlighting the need for financial education.

15. Which of the following is NOT a part of Financial Literacy campaigns?

• A. Educating about savings and investments
• B. Awareness about digital frauds
• C. Understanding credit and debt management
• D. Selling luxury products to customers

Financial Literacy aims at educating people on savings, investments, credit, insurance, and digital safety — not selling luxury items.

16. What is the main objective of Rural Self Employment Training Institutes (RSETIs)?

• A. To provide direct bank loans to farmers
• B. To distribute subsidies for rural housing
• C. To provide free training for rural youth in self-employment skills
• D. To promote international trade from rural areas

RSETIs are dedicated institutions providing free residential training to rural unemployed youth for skill development and self-employment opportunities.

17. RSETIs are promoted and managed by:

• A. NABARD directly
• B. Banks in collaboration with the Ministry of Rural Development
• C. Only State Governments
• D. Reserve Bank of India

RSETIs are sponsored by banks and supported by the Ministry of Rural Development (MoRD) to promote entrepreneurship in rural areas.

18. Which of the following services is provided by RSETIs after training the candidates?

• A. Post-training handholding support and credit linkage with banks
• B. Providing direct government employment
• C. Issuing insurance policies
• D. Trading in stock markets

RSETIs not only provide training but also help candidates with credit linkage and guidance until they establish their ventures successfully.

19. The RSETI model was inspired by which successful initiative?

• A. Self Help Group (SHG) linkage program
• B. Pradhan Mantri Jan Dhan Yojana
• C. Lead Bank Scheme
• D. Rural Development and Self Employment Training Institute (RUDSETI)

The RSETI model was developed based on the success of RUDSETI, which was promoted by Syndicate Bank, Canara Bank, and SDME Trust.

20. Which Ministry provides policy support and funding for RSETIs?

• A. Ministry of Finance
• B. Ministry of Rural Development (MoRD)
• C. Ministry of Skill Development
• D. Ministry of MSME

The Ministry of Rural Development (MoRD) provides guidelines, policy support, and partial funding for RSETIs in partnership with sponsoring banks.