Chapter 45: Data Communication Network and EFT Systems (JAIIB – Paper 2)

1. Which of the following is the most common network topology used in banking data communication?

  • A. Ring topology
  • B. Bus topology
  • C. Mesh topology
  • D. Star topology
Star topology is widely used in banking networks due to centralized control, easy fault detection, and reliability.

2. INFINET (Indian Financial Network), used by banks in India, is based on which technology?

  • A. Satellite communication
  • B. VSAT technology
  • C. Mobile 4G LTE
  • D. Optical Fiber only
INFINET, launched by IDRBT, primarily uses VSAT (Very Small Aperture Terminal) satellite technology for secure communication among banks.

3. Which institution established the Indian Financial Technology and Allied Services (IFTAS) for providing network services to banks?

  • A. NPCI
  • B. SEBI
  • C. IDRBT
  • D. RBI
IDRBT (Institute for Development & Research in Banking Technology) promoted IFTAS to provide networking and payment infrastructure services to Indian banks.

4. Which of the following is NOT an EFT system in India?

  • A. SWIFT
  • B. NEFT
  • C. RTGS
  • D. IMPS
SWIFT is a global messaging system, not an Indian EFT system. NEFT, RTGS, and IMPS are domestic EFT systems.

5. Which emerging trend in banking communication networks allows multiple banks to connect securely over cloud infrastructure?

  • A. Leased Line Networks
  • B. Dial-up Modems
  • C. Cloud-based Networks
  • D. Co-axial Cable Systems
Cloud-based networks are an emerging trend, offering scalability, flexibility, and cost-effectiveness for secure interbank communication.

6. The Structured Financial Messaging System (SFMS) used in Indian banking is inspired by which international system?

  • A. NEFT
  • B. RTGS
  • C. UPI
  • D. SWIFT
SFMS was developed on the lines of SWIFT, enabling secure and standardized financial messaging in India.

7. Which was the first Electronic Funds Transfer (EFT) system introduced in India by RBI?

  • A. NEFT
  • B. EFT (Electronic Funds Transfer, 1990s)
  • C. RTGS
  • D. IMPS
RBI introduced the EFT system in the early 1990s to allow electronic transfer of funds between bank branches in select cities. NEFT and RTGS evolved later as improved systems.

8. NEFT system introduced in India in 2005 replaced which earlier EFT system?

  • A. SWIFT
  • B. IMPS
  • C. Special EFT (SEFT)
  • D. RTGS
NEFT replaced the Special EFT (SEFT) system in 2005, providing a more efficient nationwide fund transfer mechanism with hourly settlements.

9. In RTGS, the settlement of transactions takes place on which basis?

  • A. Real-time gross basis
  • B. Batch processing basis
  • C. Deferred net settlement basis
  • D. End-of-day settlement basis
RTGS settles each transaction individually in real-time on a gross basis, unlike NEFT which works in half-hourly batches.

10. Structured Financial Messaging System (SFMS) was developed in India to provide messaging similar to:

  • A. NEFT
  • B. IMPS
  • C. UPI
  • D. SWIFT
SFMS was developed by IDRBT on the lines of SWIFT, providing a secure and structured messaging platform for Indian banks.

11. Which of the following is a key advantage of SFMS over SWIFT for Indian banks?

  • A. Faster international remittances
  • B. Integration with Indian payment systems like RTGS and NEFT
  • C. Global reach in 200+ countries
  • D. Reduced forex settlement risk
SFMS is designed to integrate seamlessly with Indian EFT systems (RTGS, NEFT, CTS), providing secure messaging within the domestic banking environment.

12. In SWIFT messaging, each bank is identified uniquely by which code?

  • A. MICR Code
  • B. IFSC Code
  • C. BIC (Bank Identifier Code)
  • D. LEI Code
SWIFT assigns each participating bank a unique BIC (Bank Identifier Code), also known as the SWIFT code, for secure global communication.

13. Automated Clearing System (ACS) is mainly used for:

  • A. Bulk and repetitive transactions such as salary and dividend payments
  • B. High-value interbank settlements
  • C. One-time customer-to-merchant payment
  • D. International trade settlement
ACS is used for processing large volumes of low-value, repetitive transactions like salary, pension, and dividend payments.

14. Which of the following is an example of Automated Clearing House (ACH) in India?

  • A. RTGS
  • B. SWIFT
  • C. NACH (National Automated Clearing House)
  • D. IMPS
NPCI introduced NACH as the centralized ACH system in India to facilitate bulk transactions for subsidies, pensions, utility bills, and EMIs.

15. In Automated Clearing System, which of the following is a typical use-case of debit clearing?

  • A. Salary disbursement
  • B. EMI or utility bill collection
  • C. Dividend distribution
  • D. Interest payment on deposits
Debit clearing in ACS is used for repetitive debit instructions like EMI recovery, insurance premiums, and utility bill payments.

16. Which organization manages the National Automated Clearing House (NACH) in India?

  • A. RBI
  • B. IDRBT
  • C. SEBI
  • D. NPCI
NPCI (National Payments Corporation of India) operates NACH for centralized, efficient bulk clearing of both debit and credit transactions.

17. One of the major advantages of NACH over the old ECS system is:

  • A. Only physical mandates required
  • B. Limited to city-based clearing houses
  • C. Centralized and mandate-based processing across India
  • D. Works only for government payments
Unlike the fragmented ECS system, NACH provides a centralized platform with e-mandates and nationwide coverage for bulk transactions.

18. Which of the following is an example of a credit clearing under ACS?

  • A. Pension disbursement
  • B. EMI collection
  • C. Utility bill recovery
  • D. Insurance premium debit
Credit clearing refers to bulk credit transactions such as salary, pension, and dividend payments made directly to beneficiaries’ accounts.

19. In a two-level funds transfer system, the first level typically involves:

  • A. Settlement between bank customers
  • B. Final settlement at RBI
  • C. Transaction processing between bank branches
  • D. International remittance transfer
In two-level transfer, the first level is branch-to-branch or bank-to-bank processing, while the second level involves central settlement.

20. The second level of the two-level funds transfer system is usually carried out at:

  • A. Central Bank (RBI in India)
  • B. Individual bank headquarters
  • C. International clearing house
  • D. Regional rural bank
The final settlement in a two-level funds transfer system is done at the central bank level, ensuring netting and clearing between banks.

21. Which of the following best describes the role of two-level funds transfer in banking?

  • A. Helps in ATM cash loading
  • B. Facilitates only international payments
  • C. Used only for government securities
  • D. Ensures smooth inter-branch and inter-bank settlements
Two-level systems ensure that funds are transferred first within banks and then settled between banks through RBI, making the payment system efficient.

22. Which was the first major electronic payment system introduced by RBI in India for bulk transfers?

  • A. NEFT
  • B. EFT (Electronic Funds Transfer, 1990s)
  • C. IMPS
  • D. UPI
The EFT system introduced in the 1990s was India’s first electronic payment system, allowing fund transfers between select branches.

23. Which of the following represents the correct order in the evolution of electronic payment systems in India?

  • A. IMPS → EFT → NEFT → UPI
  • B. EFT → UPI → RTGS → NEFT
  • C. EFT → SEFT → NEFT → RTGS → IMPS → UPI
  • D. UPI → RTGS → NEFT → EFT
India’s payment systems evolved in this order: EFT (1990s) → SEFT → NEFT (2005) → RTGS (2004) → IMPS (2010) → UPI (2016).

24. Unified Payments Interface (UPI), launched in 2016, is managed by:

  • A. NPCI
  • B. RBI
  • C. IDRBT
  • D. SEBI
NPCI (National Payments Corporation of India) operates UPI, a revolutionary real-time mobile-based payment system.

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