Types of Banks & Financial Institutions MCQs
India General Knowledge
Types of Banks & Financial Institutions MCQs
MODULE 7: Banking, Finance & Financial Awareness
📘 Sub-Topic 1: Broad Classification of Banks in India
Q1. Which of the following is the primary basis for classifying banks in India?
A. Profitability
B. Ownership and functions
C. Size of capital
D. Area of operation only
✅ Correct Answer: B. Ownership and functions
📝 Explanation:
Banks in India are mainly classified based on ownership (public, private, foreign) and functions (commercial, cooperative, development, specialised), which helps in understanding their role in the financial system.
Q2. Which of the following is a commercial bank?
A. NABARD
B. SIDBI
C. State Bank of India
D. EXIM Bank
✅ Correct Answer: C. State Bank of India
📝 Explanation:
Commercial banks like SBI accept deposits from the public and provide loans for trade, industry, agriculture, and personal needs.
Q3. Commercial banks primarily aim to:
A. Provide long-term industrial finance only
B. Promote cooperative movement
C. Accept deposits and lend money
D. Regulate the financial system
✅ Correct Answer: C. Accept deposits and lend money
📝 Explanation:
The core function of commercial banks is financial intermediation—mobilising savings and providing credit.
Q4. Which category of banks includes public and private sector banks?
A. Cooperative banks
B. Development banks
C. Commercial banks
D. Central banks
✅ Correct Answer: C. Commercial banks
📝 Explanation:
Both public sector banks and private sector banks fall under the category of commercial banks.
Q5. Which institution stands at the top of the Indian banking system?
A. SBI
B. NABARD
C. SEBI
D. Reserve Bank of India
✅ Correct Answer: D. Reserve Bank of India
📝 Explanation:
The RBI is India’s central bank, controlling monetary policy and supervising all banks and financial institutions.
📘 Sub-Topic 2: Public Sector, Private Sector & Foreign Banks
Q6. Public Sector Banks are those in which the government holds:
A. 100% ownership
B. More than 75% ownership
C. More than 51% ownership
D. Exactly 50% ownership
✅ Correct Answer: C. More than 51% ownership
📝 Explanation:
A bank is classified as a Public Sector Bank when the Government of India owns more than 51% of its equity.
Q7. Which of the following is a private sector bank?
A. Punjab National Bank
B. Bank of Baroda
C. ICICI Bank
D. Central Bank of India
✅ Correct Answer: C. ICICI Bank
📝 Explanation:
ICICI Bank is a private sector bank, owned and managed by private shareholders.
Q8. Which of the following is a foreign bank operating in India?
A. Axis Bank
B. Canara Bank
C. HSBC
D. Union Bank of India
✅ Correct Answer: C. HSBC
📝 Explanation:
Foreign banks like HSBC operate in India through branches and focus on international trade, NRI services, and corporate banking.
Q9. Private sector banks are generally known for:
A. Limited technology usage
B. Slower decision making
C. Higher operational efficiency
D. Government-controlled lending
✅ Correct Answer: C. Higher operational efficiency
📝 Explanation:
Private banks often adopt advanced technology, faster services, and customer-centric innovations.
Q10. Foreign banks in India are regulated by:
A. Ministry of Finance
B. SEBI
C. RBI
D. World Bank
✅ Correct Answer: C. RBI
📝 Explanation:
All banks operating in India, including foreign banks, are regulated by the Reserve Bank of India.
📘 Sub-Topic 3: Cooperative Banks & Regional Rural Banks
Q11. Cooperative banks operate mainly on the principle of:
A. Profit maximisation
B. Mutual assistance
C. Centralised control
D. Shareholder dominance
✅ Correct Answer: B. Mutual assistance
📝 Explanation:
Cooperative banks function on cooperative principles, aiming at service and mutual benefit, especially for farmers and small borrowers.
Q12. Which of the following is a feature of cooperative banks?
A. Operated only by the RBI
B. Owned by members
C. Foreign ownership
D. Only urban operations
✅ Correct Answer: B. Owned by members
📝 Explanation:
Cooperative banks are member-owned institutions, where customers are also shareholders.
Q13. Regional Rural Banks (RRBs) were established to:
A. Serve metropolitan cities
B. Finance large industries
C. Promote rural development
D. Regulate cooperative banks
✅ Correct Answer: C. Promote rural development
📝 Explanation:
RRBs aim to provide banking and credit facilities to rural and semi-urban areas, especially farmers and artisans.
Q14. RRBs are jointly owned by:
A. RBI and NABARD
B. Central Government, State Government & Sponsor Bank
C. State Government only
D. Private shareholders
✅ Correct Answer: B. Central Government, State Government & Sponsor Bank
📝 Explanation:
RRBs have a tripartite ownership structure, ensuring balanced governance.
Q15. Which institution supervises Regional Rural Banks?
A. SEBI
B. NABARD
C. RBI
D. Ministry of Rural Development
✅ Correct Answer: B. NABARD
📝 Explanation:
RRBs are supervised by National Bank for Agriculture and Rural Development (NABARD) on behalf of RBI.
📘 Sub-Topic 4: Specialised & Small Banks
Q16. Payments Banks are allowed to:
A. Issue credit cards
B. Provide large corporate loans
C. Accept deposits and offer remittance services
D. Finance infrastructure projects
✅ Correct Answer: C. Accept deposits and offer remittance services
📝 Explanation:
Payments banks can accept deposits and facilitate digital payments but cannot lend or issue credit cards.
Q17. Small Finance Banks mainly aim to:
A. Serve multinational corporations
B. Promote financial inclusion
C. Regulate the banking system
D. Provide foreign exchange services only
✅ Correct Answer: B. Promote financial inclusion
📝 Explanation:
Small Finance Banks provide basic banking services to underserved and unbanked populations.
Q18. Which of the following is a Small Finance Bank?
A. HDFC Bank
B. Bandhan Bank
C. SBI
D. IDBI Bank
✅ Correct Answer: B. Bandhan Bank
📝 Explanation:
Bandhan Bank is one of India’s prominent Small Finance Banks, focusing on micro-credit and inclusion.
Q19. Which banks primarily focus on short-term credit needs of farmers?
A. Development banks
B. Cooperative banks
C. Foreign banks
D. Payments banks
✅ Correct Answer: B. Cooperative banks
📝 Explanation:
Cooperative banks play a crucial role in providing short-term agricultural credit.
Q20. Which institution regulates Payments Banks and Small Finance Banks?
A. SEBI
B. NABARD
C. RBI
D. Ministry of Finance
✅ Correct Answer: C. RBI
📝 Explanation:
Payments Banks and Small Finance Banks operate under licenses issued by the RBI.
📘 Sub-Topic 5: Development Banks & Financial Institutions
Q21. Development banks primarily provide:
A. Short-term consumer loans
B. Long-term finance for development
C. Foreign exchange services
D. Retail banking services
✅ Correct Answer: B. Long-term finance for development
📝 Explanation:
Development banks support industrial growth, infrastructure, MSMEs, and exports through long-term financing.
Q22. Which institution supports agricultural and rural development?
A. SIDBI
B. NABARD
C. EXIM Bank
D. LIC
✅ Correct Answer: B. NABARD
📝 Explanation:
NABARD promotes agriculture, rural credit, and cooperative institutions.
Q23. SIDBI mainly focuses on financing:
A. Agriculture
B. Housing
C. Small and Medium Enterprises
D. Exports
✅ Correct Answer: C. Small and Medium Enterprises
📝 Explanation:
Small Industries Development Bank of India (SIDBI) provides credit and support to MSMEs.
Q24. EXIM Bank is primarily associated with:
A. Import-export financing
B. Rural credit
C. Housing loans
D. Consumer banking
✅ Correct Answer: A. Import-export financing
📝 Explanation:
Export-Import Bank of India facilitates India’s foreign trade.
Q25. Which financial institution mobilises contractual savings?
A. RBI
B. LIC
C. SIDBI
D. NABARD
✅ Correct Answer: B. LIC
📝 Explanation:
Life Insurance Corporation of India (LIC) mobilises long-term savings through insurance policies.
📘 Sub-Topic 6: Regulatory & Investment Institutions
Q26. Which institution regulates the capital market in India?
A. RBI
B. NABARD
C. SEBI
D. IRDAI
✅ Correct Answer: C. SEBI
📝 Explanation:
Securities and Exchange Board of India (SEBI) regulates stock markets and investor protection.
Q27. Which institution regulates the insurance sector?
A. RBI
B. SEBI
C. IRDAI
D. LIC
✅ Correct Answer: C. IRDAI
📝 Explanation:
Insurance Regulatory and Development Authority of India oversees insurance companies.
Q28. Mutual funds in India are regulated by:
A. RBI
B. SEBI
C. NABARD
D. IRDAI
✅ Correct Answer: B. SEBI
📝 Explanation:
SEBI ensures transparency and investor protection in mutual fund operations.
Q29. Which institution primarily manages pension funds?
A. SEBI
B. RBI
C. PFRDA
D. LIC
✅ Correct Answer: C. PFRDA
📝 Explanation:
Pension Fund Regulatory and Development Authority regulates pension schemes like NPS.
Q30. Overall, financial institutions in India aim to:
A. Maximise profits only
B. Support balanced economic development
C. Replace commercial banks
D. Control government finance
✅ Correct Answer: B. Support balanced economic development
📝 Explanation:
Banks and financial institutions collectively ensure credit flow, financial stability, inclusion, and long-term economic growth.
✅ Exam Relevance
These MCQs are strictly aligned with India-specific GK syllabus and are highly useful for:
- UPSC, SSC, Banking (IBPS, SBI, RBI)
- State PSCs, Railways, Defence, Insurance
- School, College & University Exams
- Entrance & Competitive Examinations
Types of Banks & Financial Institutions MCQs
A clear understanding of the types of banks and financial institutions in India is fundamental for mastering banking awareness and financial GK.
This MCQ set is systematically structured, covering commercial banks, cooperative banks, regional rural banks, small and payments banks, development banks, and regulatory institutions, ensuring strong conceptual clarity.
These questions help aspirants:
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Understand the functional role of each bank and institution
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Revise high-frequency exam topics efficiently
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Build a solid foundation for Banking, UPSC, SSC, and State-level exams
Regular practice of these MCQs strengthens both conceptual understanding and exam performance.
❓ FAQ Section
Q1. What are the main types of banks in India?
India has commercial banks, cooperative banks, regional rural banks, small finance banks, payments banks, and foreign banks, regulated by the RBI.
Q2. What are financial institutions in India?
Financial institutions include development banks, insurance institutions, investment and regulatory bodies that support economic growth and financial stability.
Q3. Which financial institutions are most important for exams?
NABARD, SIDBI, EXIM Bank, LIC, SEBI, IRDAI, and PFRDA are frequently asked in competitive examinations.
Q4. Are these MCQs useful for banking exams like IBPS and SBI?
Yes, these MCQs are highly relevant for IBPS, SBI PO/Clerk, RBI, and other banking examinations.
Q5. How should I prepare banking awareness topics effectively?
Study topic-wise MCQs with explanations, revise institutional roles, and practice previous-year questions regularly.
🎯 Targeting Exams
🎓 Exams Covered by These MCQs
These Types of Banks & Financial Institutions MCQs are specially useful for:
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Banking Exams: IBPS PO/Clerk, SBI PO/Clerk, RBI Grade B, RBI Assistant
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Central Exams: UPSC CSE, SSC CGL, SSC CHSL, SSC MTS
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State Exams: State PSCs, State Banking & Finance Exams
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Insurance & Finance Exams: LIC AAO/ADO, Insurance AO, ADO
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Academic Exams: School exams, College & University exams, Entrance tests