Unit 4: Role of Priority Sector and MSME in the Indian Economy (JAIIB - MODULE A)

1. What is the main objective of Priority Sector Lending (PSL) in India?

• A. To promote only industrial growth
• B. To increase bank profitability
• C. To encourage foreign trade
• D. To ensure that vulnerable sectors of the economy get adequate credit

PSL aims to provide timely and sufficient credit to weaker and under-served sectors like agriculture, MSMEs, education, housing, and others.

2. Which of the following is NOT included under Priority Sector Lending (PSL)?

• A. Agriculture
• B. Stock Market Investments
• C. MSMEs
• D. Export Credit

PSL covers sectors that impact inclusive growth. Stock market investments are not a part of PSL categories.

3. As per RBI guidelines, what is the current Priority Sector Lending target for domestic commercial banks and foreign banks with more than 20 branches?

• A. 30% of ANBC
• B. 35% of ANBC
• C. 40% of ANBC
• D. 50% of ANBC

RBI mandates that domestic scheduled commercial banks and foreign banks with 20+ branches must allocate 40% of their Adjusted Net Bank Credit (ANBC) to PSL.

4. Which of the following correctly represents the categories under Priority Sector Lending?

• A. Agriculture, MSME, Education, Housing, Social Infrastructure, Renewable Energy, Weaker Sections, Export Credit
• B. Agriculture, Heavy Industries, Stock Market, MSME
• C. Agriculture, Mining, MSME, Infrastructure
• D. Housing, Defense, Real Estate, Stock Market

RBI has identified specific sectors as priority: Agriculture, MSME, Education, Housing, Social Infrastructure, Renewable Energy, Weaker Sections, and Export Credit.

5. Which sub-target is specified for agriculture under the Priority Sector Lending norms for commercial banks?

• A. 12% of ANBC
• B. 18% of ANBC
• C. 20% of ANBC
• D. 25% of ANBC

Out of the total PSL target of 40% of ANBC, commercial banks must ensure at least 18% is lent to the agriculture sector.

6. As per RBI norms, what is the target for lending to weaker sections within Priority Sector Lending (PSL) for commercial banks?

• A. 5% of ANBC
• B. 7% of ANBC
• C. 10% of ANBC
• D. 15% of ANBC

Commercial banks are required to allocate at least 10% of Adjusted Net Bank Credit (ANBC) to weaker sections under PSL norms.

7. As per the revised definition of MSME (2020), which of the following is correct for a medium enterprise?

• A. Investment up to ₹1 crore and turnover up to ₹5 crore
• B. Investment up to ₹50 crore and turnover up to ₹250 crore
• C. Investment up to ₹10 crore and turnover up to ₹50 crore
• D. Investment up to ₹20 crore and turnover up to ₹100 crore

As per the Atmanirbhar Bharat package (June 2020), a medium enterprise is one with investment up to ₹50 crore and turnover up to ₹250 crore.

8. Which of the following is a major contribution of MSMEs to the Indian economy?

• A. Generating large-scale employment opportunities
• B. Reducing fiscal deficit
• C. Controlling inflation
• D. Increasing foreign exchange reserves only

MSMEs play a vital role in generating employment, promoting entrepreneurship, and contributing to inclusive growth, especially in rural and semi-urban areas.

9. In Priority Sector Lending, what is the target for lending to Micro Enterprises within the MSME sector by domestic commercial banks?

• A. 5% of ANBC
• B. 7% of ANBC
• C. 10% of ANBC
• D. 7.5% of ANBC

Banks are required to ensure that 7.5% of their Adjusted Net Bank Credit (ANBC) is allocated to micro enterprises under PSL.

10. Which of the following best describes the significance of MSMEs in India's GDP?

• A. Contribute around 10% of GDP and negligible exports
• B. Contribute around 30% of GDP and nearly 45% of total exports
• C. Contribute less than 5% of GDP and no role in exports
• D. Contribute 50% of GDP and 70% of exports

MSMEs contribute about 30% to India’s GDP and nearly 45% to total exports, playing a crucial role in economic development.

11. Approximately how much is the contribution of MSMEs to India’s GDP as per recent estimates?

• A. Around 30%
• B. Around 15%
• C. Around 45%
• D. Around 60%

MSMEs contribute about 30% of India’s GDP, making them a crucial driver of inclusive and sustainable economic growth.

12. Which of the following schemes provides collateral-free credit guarantee to MSMEs?

• A. Make in India
• B. Stand-Up India
• C. Startup India
• D. CGTMSE

Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) provides collateral-free credit facilities to MSMEs through banks and financial institutions.

13. Under the Atmanirbhar Bharat package (2020), which major reform was introduced for MSME classification?

• A. Classification based only on investment
• B. Composite criteria of both investment and turnover
• C. Classification based on number of employees
• D. Classification based on paid-up capital

The 2020 reforms introduced a composite definition for MSMEs based on both investment and turnover, making it more inclusive.

14. Which government initiative provides an online single-window system for MSME registration?

• A. Udyog Bandhu
• B. Mudra Portal
• C. Udyam Registration Portal
• D. MSME Sampark

The Udyam Registration Portal provides a single-window online system for easy and paperless registration of MSMEs.

15. The CHAMPIONS portal launched by the Ministry of MSME is mainly designed for:

• A. Export credit financing for MSMEs
• B. Grievance redressal, handholding, and support to MSMEs
• C. Providing only subsidies to MSMEs
• D. Facilitating FDI in MSME sector

The CHAMPIONS portal (Creation and Harmonious Application of Modern Processes for Increasing Output and National Strength) was launched to help MSMEs by resolving issues, handholding, and providing real-time support.

16. Under the Atmanirbhar Bharat package, what was one of the key announcements for MSMEs?

• A. Reduction of PSL targets for MSMEs
• B. Abolishment of Udyam registration
• C. Limiting export opportunities for MSMEs
• D. Introduction of ₹3 lakh crore collateral-free automatic loans for MSMEs

The Atmanirbhar Bharat package (May 2020) announced ₹3 lakh crore collateral-free automatic loans for MSMEs to help them recover from the pandemic impact.

17. Which of the following is a major reform under Atmanirbhar Bharat for MSMEs?

• A. Classification of MSMEs based only on exports
• B. Removal of distinction between manufacturing and services sector MSMEs
• C. Restricting MSMEs from government tenders
• D. Introduction of foreign ownership norms for MSMEs

The Atmanirbhar Bharat reforms removed the distinction between manufacturing and services sector MSMEs, providing equal treatment and growth opportunities.

18. What is the primary objective of the Make in India initiative launched in 2014?

• A. To transform India into a global manufacturing hub
• B. To promote only IT services exports
• C. To encourage Indian companies to shift production abroad
• D. To regulate stock market investments

Make in India was launched to encourage domestic and foreign companies to manufacture in India, boosting employment, skill development, and innovation.

19. How many sectors were initially identified as focus areas under the Make in India programme?

• A. 12 sectors
• B. 18 sectors
• C. 25 sectors
• D. 30 sectors

The Make in India programme initially identified 25 priority sectors including automobiles, textiles, defense, and renewable energy for focused growth.

20. Which of the following correctly highlights the role of Make in India in strengthening MSMEs?

• A. Restricts MSMEs from participating in global supply chains
• B. Provides opportunities for MSMEs to integrate with global and domestic manufacturing value chains
• C. Encourages only foreign companies to operate in India
• D. Reduces government support to small enterprises

Make in India supports MSMEs by enabling their participation in supply chains, fostering innovation, and providing access to new domestic and global markets.

21. What is the primary objective of the Start-up India initiative launched in 2016?

• A. To promote innovation and create an ecosystem for entrepreneurship in India
• B. To provide subsidies to large corporates
• C. To encourage only foreign direct investment in India
• D. To regulate export-import policies

Start-up India was launched in January 2016 to foster entrepreneurship, innovation, job creation, and a supportive environment for start-ups in India.

22. Which of the following benefits is NOT provided under the Start-up India scheme?

• A. Tax holiday for 3 consecutive years
• B. Easier patent filing and IPR protection
• C. 100% government ownership of start-ups
• D. Fund of Funds for start-ups

Start-up India provides tax holidays, easier compliance, funding support, and IPR facilitation, but does not involve 100% government ownership of start-ups.

23. The Stand-up India scheme primarily focuses on providing bank loans to which category of entrepreneurs?

• A. Only large corporates
• B. SC/ST and women entrepreneurs
• C. NRIs
• D. Farmers’ cooperatives

Stand-up India (launched in 2016) provides bank loans between ₹10 lakh to ₹1 crore to SC/ST and women entrepreneurs for setting up greenfield enterprises.

24. Under Stand-up India, what is the loan limit available to eligible entrepreneurs?

• A. ₹1 lakh – ₹5 lakh
• B. ₹5 lakh – ₹25 lakh
• C. ₹25 lakh – ₹75 lakh
• D. ₹10 lakh – ₹1 crore

Stand-up India provides composite loans ranging from ₹10 lakh to ₹1 crore for SC/ST and women entrepreneurs to promote inclusive growth.

25. Which of the following digital initiatives is specifically designed to support MSMEs?

• A. Digital India only for rural education
• B. Smart Cities Mission
• C. Digital MSME Scheme
• D. Atal Pension Yojana

The Digital MSME Scheme encourages technology adoption, cloud computing, and digital tools to enhance competitiveness of MSMEs.