Reserve Bank of India MCQ Quiz - Objective Question with Answer for Reserve Bank of India - Download Free PDF

The correct answer is Financial Inclusion Index.

Key Points

• The Reserve Bank of India (RBI) launched the Financial Inclusion Index (FI-Index) in 2021 to measure the extent of financial inclusion in India.
• The FI-Index is a comprehensive measure that includes the availability, accessibility, and usage of financial products and services.
• It is constructed on a scale of 0 to 100, where 0 represents complete financial exclusion, and 100 indicates full financial inclusion.
• The index comprises three parameters: Access (35%), Usage (45%), and Quality (20%), making it multidimensional.
• It is published annually by the RBI without any base year, serving as a key indicator of progress in India's financial inclusion initiatives.

Additional Information

• Financial Inclusion:
  • Financial inclusion refers to providing individuals and businesses access to useful and affordable financial products and services.
  • It includes savings accounts, credit, insurance, and payment services, delivered responsibly and sustainably.
• Government Initiatives for Financial Inclusion:
  • Pradhan Mantri Jan Dhan Yojana (PMJDY): A flagship scheme to provide universal access to banking facilities.
  • Aadhaar-enabled Payment System (AePS): A platform for financial inclusion using Aadhaar-based authentication.
• Importance of Financial Inclusion:
  • Empowers economically weaker sections by providing them access to financial resources.
  • Boosts economic development and reduces income inequality.
  • Promotes a cashless economy and enhances transparency in financial transactions.
• Global Initiatives:
  • The World Bank's Global Findex Database tracks financial inclusion worldwide.
  • The Alliance for Financial Inclusion (AFI) promotes policy innovation for financial inclusion globally.

The correct answer is 2007.

Key Points

• The Reserve Bank of India (RBI) was empowered to regulate the money market, foreign exchange market, government securities market, and gold-related securities market in 2007.
• This empowerment came through amendments to various acts, including the Reserve Bank of India Act, 1934.
• The move aimed to strengthen the regulatory framework and ensure financial stability in the Indian market.
• This regulatory power allowed the RBI to oversee and manage the liquidity and stability of these critical financial markets effectively.

Additional Information

• Reserve Bank of India (RBI)
  • Established in 1935, the RBI is India's central bank and regulatory body responsible for the issue and supply of the Indian rupee.
  • It also manages the country's main payment systems and works to promote its economic development.
  • The RBI plays a crucial role in the development strategy of the government of India.
• Money Market
  • The money market is a component of the financial market where short-term borrowing and lending of funds occur.
  • It involves financial instruments with high liquidity and short maturities, typically less than one year.
• Foreign Exchange Market (Forex)
  • The foreign exchange market is a global decentralized or over-the-counter market for trading currencies.
  • This market determines foreign exchange rates for every currency.
• Government Securities Market
  • This market involves the buying and selling of government securities, which are debt instruments issued by the government to finance its expenditures.
  • These securities are considered risk-free as they are backed by the government.
• Gold-Related Securities Market
  • This market involves trading financial instruments linked to gold, such as gold ETFs, sovereign gold bonds, and other derivatives.
  • It provides investors with exposure to gold without the need to hold the physical metal.

The correct answer is 1949.

Key Points

• The Reserve Bank of India 
  • The Reserve Bank of India (RBI) is the apex institution that regulates the circulation of the Indian rupee, monetary policy, and the banking system of the Indian economy.
  • RBI was established in the year 1935 under the Reserve Bank of India Act of 1934.
  • The Reserve Bank of India, which was originally set up as a shareholder's bank, began operations on April 01, 1935, and was nationalized on January 1st, 1949.
  •  The Government of India nationalized the Reserve Bank under the Reserve Bank (Transfer of Public Ownership) Act of 1948.
  • The Reserve Bank of India was set up on the basis of the recommendations of the Hilton Young Commission.

Thus, the Reserve Bank of India was nationalized in the year 1949.

Additional Information

• Functions of the Reserve Bank of India
  •   Formulation and regulation of the monetary policy.
  • Currency issuance and management.
  • Foreign exchange management.
  • Debt and cash management for state and central governments.
  • Regulation and supervision of the banking and non-banking financial institutions, including credit information companies.

The correct answer is the Reserve Bank of India.

Reserve Bank of India is the apex banking institution of India that regulates the financial sector.

Key Points

• The  Reserve Bank Of India is the apex banking institution.
• It has a basic function “to regulate the issue of Bank Notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage.” 
• It commenced operations on April 1, 1935, is at the center of India’s financial system. Hence it is called the Central Bank.
• It has a fundamental commitment to maintaining the nation’s monetary and financial stability.
• It started as a private share-holders bank – but was nationalized in 1949, under the Reserve Bank (Transfer of Public Ownership) Act, 1948.
• It is a banker to the Central Government, State Governments, and Banks.

Important Points 

• Key functions of RBI Include:
  • Monetary policy.
  • Supervision of Banking companies, Non-banking Finance Companies and the Financial Sector, Primary Dealers, and Credit Information Bureaus.
  • Regulation of money market, government securities market, foreign exchange market, and derivatives linked to these markets.
  • Management of foreign currency reserves of the country and its current and capital account.
  • Issue and management of currency.
  • Oversight of payment and settlement systems.
  • Development of the banking sector.
  • Research and statistics.
  • finance companies are regulated by RBI.

Reserve Bank of India is the odd one out of all because it controls the functions of other banks. This is the apex institution that controls the money demand and supply in the market.

Reserve Bank Of India (RBI):

1. The Reserve Bank of India (RBI) is the apex monetary Institution that controls Indian Rupee, monetary policy, and the banking system in India
2. . The central bank was first established in the year 1935 under the Reserve Bank of India Act, 1934.
3. After India's independence, the RBI was nationalized on 1 January 1949. In the year 1974, RBI became a member of the Asian Clearing Union, an institution established by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
4. RBI plays a vital role in the developmental strategy of the Government as it regulates the monetary policy of the country.

However, the State Bank of India, Union Bank of India, Central Bank of India are commercial banks of India controlled by the Reserve bank of India.

The correct answer is Dr. Urjit Patel.

Key Points

• On 8 November 2016, the Government of India announced the demonetization of all ₹500 and ₹1,000 banknotes of the Mahatma Gandhi Series. 
• Modi claimed that the action would curtail the shadow economy and reduce the use of illicit and counterfeit cash to fund illegal activity and terrorism.

Additional InformationUrjit Patel:

• He is an Indian economist, who served as the 24th Governor of the Reserve Bank of India from 4 September 2016 to 10 December 2018. 
• He resigned from his post on 10 December 2018, being the first RBI governor to state personal reasons as a driving factor for resigning.
• He is the fifth RBI governor to have resigned from his post before his term ended in September 2019.
• Demonetization - Demonetization is the act of stripping a currency unit of its status as legal tender.
• It occurs whenever there is a change in national currency.
• The current form or forms of money is pulled from circulation and retired, often to be replaced with new notes or coins.

The correct answer is Shaktikanta Das.

Key Points

• Shaktikanta Das is a Tamil Nadu cadre retired Indian Administrative Service (IAS) officer from the 1980 batch.
• He was a member of the Fifteenth Finance Commission and India's Sherpa to the G20 before becoming the 25th governor of the Reserve Bank of India (RBI).
• Das worked for the Indian and Tamil Nadu governments in various roles as an IAS officer, including as Economic Affairs Secretary, Revenue Secretary, and Fertilizers Secretary.
• He has also served as India's Alternate Governor at the World Bank, the Asian Development Bank, the National Development Bank, and the Asian Infrastructure Investment Bank.

Important Points

• Raghuram Rajan served as the Reserve Bank of India's 23rd Governor from September 2013 to September 2016, and he also served as Vice-Chairman of the Bank for International Settlements in 2015.
• Urjit Patel succeeded Raghuram Rajan as the 24th governor of the Reserve Bank of India, serving from 2016 to 2018.
• Arvind Subramanian is an Indian economist who served as the Government of India's Chief Economic Advisor from 16 October 2014 to 20 June 2018.

The correct answer is National Housing Bank.

Key Points

• National Housing Bank is a subsidiary of RBI.
• The National Housing Bank (NHB) is India's apex regulatory authority for housing finance enterprises' overall regulation and licensing.
• It is governed by the Government of India's Ministry of Finance.
• The National Housing Bank Act of 1987 was established on July 9, 1988.
• The National Housing Bank (NHB) is the most important financial institution in the housing industry.
• NHB was founded with the goal of serving as a primary agency for promoting housing finance institutions at the local and regional levels, as well as providing financial and other support to such institutions and matters related to them.

Important Points

• The National Housing Bank Act of 1987 was revised by the Finance Act of 2019.
• The Reserve Bank of India gains regulatory authority over Housing Finance Companies (HFCs) as a result of the change.
• The NHB registers and oversees Housing Finance Companies (HFCs), conducts on-site and off-site surveillance, and collaborates with other regulators.

The correct answer is Section 7.

 Key Points

• According to Section 7 of the RBI Act, the central government may from time to time give such directions to the RBI as it may, after consultation with the Governor of the Bank, consider necessary in the public interest.
• This implies that the government can invoke the Section 7 to get the central bank to take decisions on matters where it would otherwise be reluctant.

 Important Points

• Reserve Bank of India Act 1934 is the legislative act under which the Reserve Bank of India was formed.
• This act along with the Companies Act, which was amended in 1936, was meant to provide a framework for the supervision of banking firms in India.
• There is a total of 61 sections in the Reserve Bank of India Act 1934.

 Additional Information

• Section 5 of the RBI defines banking process, banking company and banking policy .
• Section 3 in The Reserve Bank of India Act, 1934 states that "A bank to be called the Reserve Bank of India shall be constituted for the purposes of taking over the management of the currency from the Central Government and of carrying on the business of banking in accordance with the provisions of this Act."
• Section 1 of the RBI act mentions the Short title, extent, and commencement of RBI.

The correct answer is 1975.

Key Points

• India decided to delink the rupee from the pound sterling and linked it to a “basket of currencies” in 1975.
• The exchange value of the rupee would be determined “with reference to daily exchange rate movements of a selected number of currencies of countries which are India’s major trading partners”.
• However, the pound sterling would continue to be used by the RBI as its “currency of intervention”. 

Additional Information

• Governor of RBI - Shaktikanta Das
• Finance Minister of India - Nirmala Sitharaman.
• There are Eleven sub-offices of RBI in India.
• There are four deputy governors of RBI - B. P. Kanungo, Mahesh Kumar Jain, M. Rajeshwar Rao, and Michael Patra. 

The correct answer is the Reserve Bank of India.

Reserve Bank of India is the apex banking institution of India that regulates the financial sector.

Key Points

• The  Reserve Bank Of India is the apex banking institution.
• It has a basic function “to regulate the issue of Bank Notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage.” 
• It commenced operations on April 1, 1935, is at the center of India’s financial system. Hence it is called the Central Bank.
• It has a fundamental commitment to maintaining the nation’s monetary and financial stability.
• It started as a private share-holders bank – but was nationalized in 1949, under the Reserve Bank (Transfer of Public Ownership) Act, 1948.
• It is a banker to the Central Government, State Governments, and Banks.

Important Points 

• Key functions of RBI Include:
  • Monetary policy.
  • Supervision of Banking companies, Non-banking Finance Companies and the Financial Sector, Primary Dealers, and Credit Information Bureaus.
  • Regulation of money market, government securities market, foreign exchange market, and derivatives linked to these markets.
  • Management of foreign currency reserves of the country and its current and capital account.
  • Issue and management of currency.
  • Oversight of payment and settlement systems.
  • Development of the banking sector.
  • Research and statistics.
  • finance companies are regulated by RBI.

The correct answer is  2013.

 Key Points

• In 2013 Reserve Bank of India become a part of the Bank for International Settlements.
• On November 10, 2015, the then Reserve Bank of India governor Raghuram Rajan became the first Indian central banker to be appointed as vice-chairman of the Bank for International Settlements (BIS).

Additional Information 

• The Bank for International Settlements (BIS) was established in 1930 in Basel, Switzerland.
• It was a result of an intergovernmental agreement between Germany, Belgium, France, the United Kingdom, Italy, Japan, the United States and Switzerland.
• It is an organization of central banks that seeks to bring more predictability and transparency in monetary policy.

The correct answer is Option 2.

Key Points

• RBI (Reserve Bank of India) is the Central Bank of the country.  
• It was set up on the basis of the recommendations of the Hilton Young Commission. 
• It was established under the Reserve Bank of India Act, 1934.
• The RBI Act, 1934 requires the Central Government to entrust the Reserve Bank with all its money, remittance, exchange and banking transactions in India and the management of its public debt.
• All the State Governments are required to maintain a minimum balance with the Reserve Bank, which varies from state to state depending on the relative size of the state budget and economic activity.
• RBI maintains a current account of State Governments for keeping their cash balances.
• Sir Benegal Rama Rau, a member of the Indian Civil Service, was the longest serving Governor of the Bank from 1949 to 1957.

Additional Information

• RBI commenced operations on April 1, 1935.
• Its first Governor was Sir Osborne Smith.
• The main purpose of creating RBI was to separate currency and credit from GoI.
• RBI was nationalised in 1949 and its first Indian Governor was CD Deshmukh.
• The headquarter of the RBI is in Mumbai.  

The Reserve Bank of India is the central bank of the country. Central banks are a relatively recent innovation and most central banks, as we know them today, were established around the early twentieth century.

The Reserve Bank of India was set up on the basis of the recommendations of the Hilton Young Commission. The Reserve Bank of India Act, 1934 (II of 1934) provides the statutory basis of the functioning of the Bank, which commenced operations on April 1, 1935.

• Regulate the issue of banknotes
• Maintain reserves with a view to securing monetary stability and
• To operate the credit and currency system of the country to its advantage.
   

The Bank began its operations by taking over from the Government the functions so far being performed by the Controller of Currency and from the Imperial Bank of India, the management of Government accounts, and public debt. The existing currency offices at Calcutta, Bombay, Madras, Rangoon, Karachi, Lahore, and Cawnpore (Kanpur) became branches of the Issue Department. Offices of the Banking Department were established in Calcutta, Bombay, Madras, Delhi, and Rangoon.

Burma (Myanmar) seceded from the Indian Union in 1937 but the Reserve Bank continued to act as the Central Bank for Burma till the Japanese Occupation of Burma and later up to April 1947. After the partition of India, the Reserve Bank served as the central bank of Pakistan up to June 1948 when the State Bank of Pakistan commenced operations. The Bank, which was originally set up as a shareholder's bank, was nationalized in 1949.