1. Who is responsible for preparing the annual accounts of a bank?
A. Reserve Bank of India
B. External Auditor
C. Board of Directors of the bank
D. Ministry of Finance
The Board of Directors of the bank is responsible for preparing the annual accounts and ensuring that they present a true and fair view of the bank's financial position.
2. Which of the following returns must be submitted by banks to the RBI periodically?
A. Statutory returns such as CRR, SLR, and NPA reports
B. Personal employee tax returns
C. Import-export customs returns
D. Municipal tax returns
Banks are required to submit statutory returns to the RBI, including those related to CRR, SLR, and asset quality (NPA reports), to ensure regulatory compliance.
3. Who audits the accounts of a scheduled bank in India?
A. Comptroller and Auditor General (CAG)
B. RBI internal audit team
C. Ministry of Finance auditors
D. Statutory external auditors appointed by the bank
The accounts of scheduled banks are audited by statutory external auditors appointed by the bank, as per provisions of the Banking Regulation Act.
4. Under which act can the RBI inspect the books and accounts of a bank?
A. Companies Act, 2013
B. Banking Regulation Act, 1949
C. RBI Act, 1934
D. Negotiable Instruments Act, 1881
The Banking Regulation Act, 1949 empowers the RBI to inspect the books and accounts of banks to ensure compliance with banking norms and regulations.
5. What is the primary objective of a bank merger or acquisition?
A. To increase employee benefits
B. To reduce RBI oversight
C. To improve financial stability and operational efficiency
D. To avoid statutory audits
Mergers and acquisitions in the banking sector aim to strengthen financial stability, improve operational efficiency, expand market presence, and achieve economies of scale.
6. For how many years is a bank required to preserve its records under the Banking Regulation Act?
A. 3 years
B. 8 years
C. 5 years
D. 10 years
Banks are required to preserve their records, including accounts and statutory documents, for a minimum of 8 years as per regulatory guidelines.
7. What is the primary purpose of returning paid instruments like cheques or drafts to the drawer?
A. To reduce operational workload
B. To increase bank revenue
C. To provide evidence of payment and maintain transparency
D. To avoid RBI inspection
Returning paid instruments provides evidence of payment to the customer and ensures proper record-keeping and transparency in banking operations.
8. Which of the following is conducted when a bank's financial condition or operations require closer scrutiny?
A. Special Audit
B. Annual Audit
C. Internal Review
D. Peer Bank Inspection
A Special Audit is conducted when there is a need for detailed examination of a bank’s accounts or operations due to suspected irregularities or unusual financial conditions.
9. During an RBI inspection of a bank, which of the following is the primary focus?
A. Employee performance appraisal
B. Customer satisfaction survey
C. Profitability of individual branches
D. Compliance with regulatory norms and accuracy of accounts
RBI inspections primarily focus on ensuring that banks comply with regulatory norms, maintain accurate accounts, and operate in a safe and sound manner.
10. Which of the following describes scrutiny in the context of bank operations?
A. Filing annual tax returns
B. Detailed examination of records, transactions, and accounts
C. Hiring external auditors
D. Conducting customer feedback surveys
Scrutiny involves a detailed examination of a bank’s records, transactions, and accounts to detect irregularities and ensure compliance with regulatory requirements.
11. What is the primary function of the Board for Financial Supervision (BFS) in India?
A. Formulating monetary policy
B. Conducting external audits of banks
C. Supervising the financial operations of banks and financial institutions
D. Approving government budgets
The Board for Financial Supervision (BFS) supervises the financial operations of banks and financial institutions to ensure stability, compliance, and sound practices.
12. Which of the following describes the acquisition of undertakings in the banking sector?
A. A bank issuing new shares to the public
B. Taking over the assets and liabilities of another bank or financial institution
C. Opening a new branch in another state
D. Merely hiring employees from another bank
Acquisition of undertakings refers to one bank taking over the assets and liabilities of another bank or financial institution, usually with regulatory approval.
13. What is the main difference between amalgamation and merger of banks?
A. Amalgamation only involves private banks
B. Merger requires RBI approval, amalgamation does not
C. Amalgamation does not transfer assets and liabilities
D. In amalgamation, two or more banks combine to form a new entity, whereas in a merger, one bank absorbs another
Amalgamation involves combining two or more banks to form a completely new entity, while in a merger, one bank absorbs another bank and continues as a single entity.
14. Which authority must approve the amalgamation or merger of banks in India?
A. Reserve Bank of India and Government of India
B. Securities and Exchange Board of India (SEBI)
C. Ministry of Corporate Affairs only
D. Board for Financial Supervision alone
The Reserve Bank of India, along with the Government of India, must approve the amalgamation or merger of banks to ensure regulatory compliance and financial stability.
15. During a bank acquisition or merger, what happens to the employees of the acquired bank?
A. They are automatically terminated
B. They are usually absorbed by the acquiring bank under similar terms and conditions
C. They have to reapply for their jobs in the new entity
D. They are transferred to RBI for employment
Employees of the acquired or merged bank are generally absorbed by the new or acquiring bank under similar terms and conditions to ensure continuity of operations and compliance with labor laws.
16. Under which act can a bank in India be ordered to be wound up?
A. Companies Act, 2013
B. Negotiable Instruments Act, 1881
C. Banking Regulation Act, 1949
D. Reserve Bank of India Act, 1934
The Banking Regulation Act, 1949 empowers the RBI and the Government to initiate winding up of banks that are unable to meet their obligations or operate safely.
17. Which of the following penalties can be imposed on a bank officer for contravention of banking regulations?
A. Only verbal warning
B. Monetary fines, suspension, or imprisonment depending on the offence
C. Revocation of citizenship
D. Mandatory training program only
Penalties under the Banking Regulation Act or related laws may include monetary fines, suspension, or even imprisonment for offences by bank officers or employees.
18. Which of the following best describes a public sector bank in India?
A. A bank owned entirely by private shareholders
B. A cooperative bank with limited government ownership
C. Any bank registered under the Companies Act
D. A bank where the majority stake is held by the Government of India
Public sector banks are those in which the Government of India holds the majority stake, ensuring government control and oversight.
19. Private sector banks differ from public sector banks mainly in:
A. Location of branches
B. Ownership structure, with majority shares held by private individuals or institutions
C. Ability to lend to government
D. Requirement to maintain CRR
Private sector banks are primarily owned by private shareholders, unlike public sector banks where the government holds the majority stake.
20. In case a bank is unable to pay its depositors, which of the following actions may be initiated?
A. RBI issuing a new license
B. Bank expansion into rural areas
C. Winding up of the bank under the Banking Regulation Act
D. Formation of a new cooperative society
If a bank cannot meet its obligations to depositors, authorities may initiate winding up proceedings under the Banking Regulation Act, ensuring orderly settlement of claims.
21. What is the primary objective of Regional Rural Banks (RRBs) in India?
A. To provide high-value corporate loans only
B. To operate only in urban centers
C. To provide credit and banking facilities to rural areas and weaker sections
D. To regulate money supply in the economy
Regional Rural Banks are established with the main objective of providing banking and credit facilities to rural areas, especially to agriculture and weaker sections of society.
22. Which of the following best defines differentiated banks?
A. Banks that operate only in metropolitan cities
B. Banks created to serve specific sectors or functions, such as payments banks or small finance banks
C. Cooperative societies offering limited banking services
D. Banks that merge with foreign banks
Differentiated banks are set up to focus on specific sectors or functions, for example, small finance banks for financial inclusion or payments banks for digital payment services.
23. Co-operative banks in India are primarily regulated by:
A. Ministry of Corporate Affairs
B. Securities and Exchange Board of India
C. Comptroller and Auditor General
D. Reserve Bank of India and State Registrars of Cooperative Societies
Co-operative banks are dual-regulated: RBI oversees their banking functions, while State Registrars govern their cooperative society aspects.
24. What is the key feature of Local Area Banks (LABs) in India?
A. They can operate nationwide without restrictions
B. They operate in a limited geographical area and provide local credit
C. They only provide corporate banking services
D. They are exempt from RBI supervision
Local Area Banks are set up to provide banking services in a limited geographical area, focusing on local credit requirements and small businesses.
25. Which of the following is a common characteristic of RRBs, Differentiated Banks, and Local Area Banks?
A. All are owned entirely by private shareholders
B. They operate without any RBI regulations
C. They are designed to promote financial inclusion and serve specific target segments
D. They are exempt from submitting statutory returns
These banks are all aimed at promoting financial inclusion by serving specific sectors or regions, focusing on extending banking facilities to underserved areas or populations.
26. Which of the following statements correctly describes the ownership of the State Bank of India (SBI)?
A. Fully privately owned bank
B. Joint venture between multiple private banks
C. Majority-owned by the Government of India
D. Owned and regulated entirely by RBI
The State Bank of India is a public sector bank where the Government of India holds the majority stake, making it subject to government oversight and regulations.
27. Regional Rural Banks (RRBs) are primarily sponsored by:
A. Ministry of Finance directly
B. Public sector banks
C. Private banks
D. Local cooperative societies
RRBs are sponsored by public sector banks which provide managerial and financial support to facilitate rural credit delivery.
28. Which of the following is an example of a public sector bank other than SBI?
A. HDFC Bank
B. ICICI Bank
C. Axis Bank
D. Punjab National Bank
Punjab National Bank is a public sector bank owned by the Government of India, unlike HDFC, ICICI, or Axis Bank which are private sector banks.
29. How does the Banking Regulation Act, 1949, apply to public sector banks?
A. It does not apply to public sector banks
B. Only for regulating interest rates
C. It applies fully, including provisions on inspection, returns, management, and winding up
D. Only for mergers and acquisitions
The Banking Regulation Act applies to all banks, including public sector banks, covering inspections, submission of returns, management of affairs, and provisions for winding up.
30. Which body has the power to issue directions to public sector banks under the Banking Regulation Act?
A. Ministry of Corporate Affairs
B. Reserve Bank of India
C. Securities and Exchange Board of India
D. Comptroller and Auditor General of India
RBI has the authority to issue directions and supervise public sector banks under the Banking Regulation Act to ensure compliance, financial stability, and regulatory adherence.
31. What does disinvestment of shares by the government in a public sector bank mean?
A. Increasing government ownership in the bank
B. Merging the bank with another bank
C. Selling a portion of government-held shares to private investors
D. Reducing the bank’s authorized capital
Disinvestment refers to the government selling part of its equity in a public sector bank to private investors, reducing its ownership stake while raising funds.
32. Co-operative banks in India are primarily established to:
A. Operate as corporate commercial banks nationwide
B. Provide credit and banking services to members in specific local areas or communities
C. Focus exclusively on forex and treasury operations
D. Finance mergers and acquisitions of large corporations
Co-operative banks are set up to provide banking and credit facilities to their members within specific local areas or communities, promoting financial inclusion.
33. Which of the following is a distinguishing feature of private sector banks in India?
A. Majority ownership by the Government of India
B. Operates only in rural areas
C. Majority shares held by private individuals or institutions
D. Exempt from RBI regulations
Private sector banks are primarily owned by private shareholders and operate under RBI supervision, unlike public sector banks which have government majority ownership.
34. Differentiated banks in India include which of the following types?
A. Banks with international branches only
B. Small Finance Banks and Payments Banks
C. Co-operative Banks only
D. Only public sector banks that merged
Differentiated banks are specialized banks created to serve specific segments, such as Small Finance Banks for financial inclusion or Payments Banks for digital transactions.
35. What is a key feature of Local Area Banks (LABs) in India?
A. They operate across all states without restrictions
B. They are exempt from RBI supervision
C. They operate within a limited geographical area and provide localized banking services
D. They focus solely on corporate and wholesale banking
Local Area Banks are designed to operate in a limited geographical region to provide banking services to local businesses and communities under RBI supervision.
