Multiple-choice questions (MCQs) with answers focused on “The Indian Banking System: Challenges and Reforms” suitable for the Civil Services Examination.

Which of the following is the central bank of India?
- A) Reserve Bank of India (RBI)
- B) State Bank of India (SBI)
- C) Bank of India (BOI)
- D) Punjab National Bank (PNB)
- Answer: A) Reserve Bank of India (RBI)
What is the primary objective of the Reserve Bank of India?
- A) To manage government accounts
- B) To ensure financial inclusion
- C) To maintain monetary stability
- D) To regulate foreign investments
- Answer: C) To maintain monetary stability
Which of the following is a major challenge faced by the Indian banking system?
- A) High interest rates
- B) Non-Performing Assets (NPAs)
- C) Low bank density
- D) Limited access to technology
- Answer: B) Non-Performing Assets (NPAs)
The Pradhan Mantri Jan Dhan Yojana aims to:
- A) Promote foreign banks
- B) Increase bank profits
- C) Enhance financial inclusion
- D) Regulate interest rates
- Answer: C) Enhance financial inclusion
What is the maximum period for which a bank can extend a loan to a single borrower under the current guidelines?
- A) 10 years
- B) 15 years
- C) 20 years
- D) No specific limit
- Answer: D) No specific limit
Which Act governs the functioning of banks in India?
- A) Companies Act
- B) Banking Regulation Act
- C) Reserve Bank of India Act
- D) Securities Contract (Regulation) Act
- Answer: B) Banking Regulation Act
Which of the following is a major reform initiative in the Indian banking sector?
- A) Liberalization of interest rates
- B) Nationalization of banks
- C) Introduction of ATM facilities
- D) Implementation of Basel III norms
- Answer: D) Implementation of Basel III norms
What does the term ‘financial inclusion’ refer to?
- A) Providing loans to rich individuals
- B) Ensuring access to financial services for all
- C) Increasing profits for banks
- D) Encouraging investments in foreign banks
- Answer: B) Ensuring access to financial services for all
Which of the following entities regulates the foreign exchange market in India?
- A) Securities and Exchange Board of India (SEBI)
- B) Reserve Bank of India (RBI)
- C) Ministry of Finance
- D) Indian Banks Association
- Answer: B) Reserve Bank of India (RBI)
The Financial Stability and Development Council (FSDC) was established to:
- A) Monitor financial inclusion
- B) Ensure stability in the financial system
- C) Promote international banking
- D) Regulate interest rates
- Answer: B) Ensure stability in the financial system
What is the primary purpose of the Banking Ombudsman Scheme?
- A) To facilitate loan approval
- B) To resolve customer complaints
- C) To enhance bank profitability
- D) To promote new banks
- Answer: B) To resolve customer complaints
Which scheme was launched to recapitalize public sector banks in India?
- A) PMAY
- B) MUDRA
- C) Indradhanush
- D) Pradhan Mantri Awas Yojana
- Answer: C) Indradhanush
What is the role of the Asset Reconstruction Companies (ARCs) in the banking sector?
- A) To lend to small businesses
- B) To acquire and manage NPAs
- C) To promote foreign investments
- D) To regulate interest rates
- Answer: B) To acquire and manage NPAs
Which of the following best describes ‘Know Your Customer’ (KYC) norms?
- A) Assessing a bank’s profits
- B) Identifying and verifying customers
- C) Providing loans to farmers
- D) Monitoring bank employees
- Answer: B) Identifying and verifying customers
The purpose of the Insolvency and Bankruptcy Code (IBC) is to:
- A) Promote foreign banks
- B) Resolve insolvency issues efficiently
- C) Regulate banking services
- D) Monitor interest rates
- Answer: B) Resolve insolvency issues efficiently
Which of the following is an objective of the NABARD?
- A) Regulate commercial banks
- B) Provide credit for rural development
- C) Manage foreign exchange
- D) Facilitate mergers and acquisitions
- Answer: B) Provide credit for rural development
The introduction of digital banking in India primarily aims to:
- A) Increase bank profits
- B) Enhance customer convenience
- C) Reduce the number of bank branches
- D) Encourage cash transactions
- Answer: B) Enhance customer convenience
Which committee recommended the implementation of banking reforms in India during the 1990s?
- A) Narasimham Committee
- B) Rangarajan Committee
- C) Malegam Committee
- D) Raghuram Rajan Committee
- Answer: A) Narasimham Committee
What is the statutory liquidity ratio (SLR)?
- A) The ratio of loans to deposits
- B) The percentage of net demand and time liabilities to be held in liquid assets
- C) The ratio of equity to total assets
- D) The interest rate set by the RBI
- Answer: B) The percentage of net demand and time liabilities to be held in liquid assets
The ‘Digital India’ initiative aims to:
- A) Increase the number of banks
- B) Promote online banking and financial inclusion
- C) Encourage cash transactions
- D) Limit the use of technology in banking
- Answer: B) Promote online banking and financial inclusion
Which of the following is NOT a type of banking institution in India?
- A) Commercial Banks
- B) Cooperative Banks
- C) Investment Banks
- D) Stock Banks
- Answer: D) Stock Banks
The Financial Action Task Force (FATF) is primarily concerned with:
- A) Regulating interest rates
- B) Combating money laundering and terrorist financing
- C) Promoting foreign investments
- D) Monitoring bank profits
- Answer: B) Combating money laundering and terrorist financing
Which of the following is a major challenge related to cybersecurity in Indian banks?
- A) Over-regulation
- B) High interest rates
- C) Increasing cyber threats
- D) Limited banking hours
- Answer: C) Increasing cyber threats
Which of the following is true regarding Public Sector Banks (PSBs) in India?
- A) They are entirely privately owned.
- B) They account for the majority of banking assets in India.
- C) They do not operate in rural areas.
- D) They are only allowed to operate within state boundaries.
- Answer: B) They account for the majority of banking assets in India.
Which scheme focuses on providing loans to small businesses in India?
- A) MUDRA
- B) PMAY
- C) NREGA
- D) Start-up India
- Answer: A) MUDRA
The primary function of the Banking Codes and Standards Board of India (BCSBI) is to:
- A) Manage public sector banks
- B) Develop customer service standards for banks
- C) Regulate interest rates
- D) Promote banking technology
- Answer: B) Develop customer service standards for banks
Which of the following terms refers to loans that are not being repaid?
- A) Performing Assets
- B) Non-Performing Assets (NPAs)
- C) Secured Loans
- D) Demand Loans
- Answer: B) Non-Performing Assets (NPAs)
The concept of ‘banking correspondents’ was introduced to:
- A) Increase banking transactions
- B) Facilitate financial inclusion in rural areas
- C) Promote international banking
- D) Enhance bank profits
- Answer: B) Facilitate financial inclusion in rural areas
Which of the following is a benefit of digital banking?
- A) Longer processing times
- B) Higher transaction fees
- C) Convenience and accessibility
- D) Reduced financial literacy
- Answer: C) Convenience and accessibility
What is the purpose of the Pradhan Mantri Mudra Yojana (PMMY)?
- A) To provide large loans to corporations
- B) To fund infrastructure projects
- C) To provide loans to micro and small enterprises
- D) To support foreign investment
- Answer: C) To provide loans to micro and small enterprises

These MCQs cover various aspects of the Indian banking system, its challenges, and reforms, providing a comprehensive assessment tool for civil services aspirants.

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