Chapter 27 - Indian Financial System-Regulators and their Roles (JAIIB - MODULE C)

1. What is the primary role of financial sector regulators in an economy?

  • A. To provide loans to businesses directly
  • B. To create wealth for investors
  • C. To encourage only foreign investments
  • D. To ensure stability, transparency, and fair practices in the financial system
Financial regulators safeguard the financial system by ensuring fair practices, stability, and protection of investors while preventing systemic risks.

2. Which of the following is NOT regulated by the Reserve Bank of India (RBI)?

  • A. Monetary policy
  • B. Issue of currency (except ₹1 notes and coins)
  • C. Insurance companies
  • D. Regulation of banks and NBFCs
Insurance companies are regulated by IRDAI, not RBI. RBI regulates banks, NBFCs, currency issuance, and monetary policy.

3. RBI controls inflation in India mainly through:

  • A. Monetary policy tools such as repo rate and CRR
  • B. Government subsidies
  • C. Export-import restrictions
  • D. Direct lending to the public
RBI uses monetary policy instruments like repo rate, reverse repo, CRR, and SLR to regulate money supply and control inflation.

4. Case Study: A bank fails to maintain the required Cash Reserve Ratio (CRR). Which regulator can impose a penalty on it?

  • A. SEBI
  • B. RBI
  • C. IRDAI
  • D. PFRDA
RBI regulates banks and ensures statutory requirements like CRR and SLR are maintained. Non-compliance can lead to penalties.

5. Which department of RBI is responsible for issuing currency notes (except one rupee note and coins)?

  • A. Monetary Policy Department
  • B. Banking Regulation Department
  • C. Issue Department
  • D. Financial Markets Department
The Issue Department of RBI is responsible for issuing and managing currency notes, while coins and ₹1 notes are issued by the Government of India.

6. What is the primary objective of SEBI?

  • A. To protect the interests of investors in the securities market
  • B. To control monetary policy
  • C. To regulate banking operations
  • D. To issue currency notes
SEBI’s primary objective is investor protection by regulating securities markets, promoting transparency, and preventing malpractices.

7. SEBI was established as a statutory body in which year?

  • A. 1988
  • B. 1990
  • C. 1993
  • D. 1992
SEBI was initially set up in 1988 as a non-statutory body and became a statutory body in 1992 through the SEBI Act, 1992.

8. Case Study: A listed company fails to disclose material financial information to the public. Which regulator has the authority to take action?

  • A. RBI
  • B. SEBI
  • C. IRDAI
  • D. PFRDA
SEBI ensures transparency and compliance for listed companies. Failure to disclose material information violates SEBI’s disclosure norms.

9. Which of the following is NOT a function of SEBI?

  • A. Regulating stock exchanges
  • B. Monitoring mutual funds
  • C. Issuing currency and coins
  • D. Regulating merchant bankers
Issuing currency and coins is the role of RBI and Government of India, not SEBI.

10. Which of the following powers does SEBI have under the SEBI Act, 1992?

  • A. To frame the country’s monetary policy
  • B. To regulate and register intermediaries like stock brokers, merchant bankers, and portfolio managers
  • C. To regulate insurance companies
  • D. To control pension funds
SEBI Act, 1992 empowers SEBI to register, regulate, and oversee market intermediaries to ensure fair functioning of capital markets.

11. What is the primary role of IRDAI?

  • A. To regulate stock markets
  • B. To manage monetary policy
  • C. To regulate and promote the insurance industry in India
  • D. To oversee pension funds
IRDAI regulates, promotes, and ensures orderly growth of the insurance sector in India while safeguarding policyholders' interests.

12. In which year was the IRDA Act passed, making IRDA a statutory body?

  • A. 1999
  • B. 1991
  • C. 2001
  • D. 1995
The IRDA Act was passed in 1999, making IRDA a statutory body to regulate and promote insurance in India.

13. Case Study: A life insurance company denies a valid claim citing ambiguous reasons. Which regulator can the policyholder approach for redressal?

  • A. SEBI
  • B. RBI
  • C. PFRDA
  • D. IRDAI
IRDAI protects policyholders' interests. Customers can approach IRDAI for grievance redressal against unfair practices by insurers.

14. Which of the following is NOT a function of IRDAI?

  • A. Protecting policyholders' interests
  • B. Regulating stock brokers and stock exchanges
  • C. Promoting efficiency in the insurance industry
  • D. Specifying qualifications for insurance intermediaries
Regulating stock brokers and exchanges is SEBI’s role, not IRDAI’s. IRDAI regulates insurers and insurance intermediaries.

15. Which mechanism has IRDAI set up to protect policyholders against insurance company defaults?

  • A. Credit Guarantee Fund
  • B. Investor Education and Protection Fund
  • C. Insurance Ombudsman system
  • D. SEBI Investor Protection Cell
The Insurance Ombudsman system was established under IRDAI to provide quick, cost-effective redressal of policyholder grievances.

16. What is the main role of PFRDA?

  • A. To regulate and develop the pension sector in India
  • B. To regulate stock exchanges
  • C. To issue government bonds
  • D. To control monetary policy
PFRDA regulates, promotes, and develops the pension industry in India to ensure financial security for citizens in retirement.

17. In which year was the PFRDA Act passed, giving it statutory status?

  • A. 2003
  • B. 2009
  • C. 2010
  • D. 2013
The PFRDA Act was passed in 2013, granting statutory status to the Pension Fund Regulatory and Development Authority.

18. Which pension scheme is directly regulated by PFRDA?

  • A. Employees’ Provident Fund (EPF)
  • B. National Pension System (NPS)
  • C. Public Provident Fund (PPF)
  • D. Atal Pension Yojana (APY) only
PFRDA regulates the National Pension System (NPS) and also oversees Atal Pension Yojana under its framework.

19. Case Study: A private sector employee wants to open a retirement savings account with flexible investment options. Which regulator oversees such pension accounts?

  • A. IRDAI
  • B. SEBI
  • C. PFRDA
  • D. RBI
PFRDA regulates the NPS and provides retirement savings options for both government and private sector employees.

20. Who acts as the trustee bank for handling pension fund contributions under PFRDA?

  • A. Reserve Bank of India
  • B. Axis Bank (earlier SBI, currently Axis Bank since 2021)
  • C. IDBI Bank
  • D. ICICI Bank
Axis Bank currently functions as the Trustee Bank under PFRDA for managing NPS funds (earlier role was with SBI).

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