1. Money is defined as:
A) Anything accepted as a medium of exchange
B) Only coins and currency notes
C) Only bank deposits
D) Only gold and silver
Answer: A
Explanation: Money is anything generally accepted as a medium of exchange.
2. Which of the following is NOT a function of money?
A) Medium of exchange
B) Store of value
C) Measure of value
D) Increasing production directly
Answer: D
Explanation: Money doesn’t directly increase production.
3. Money overcomes the problem of:
A) Capital formation
B) Double coincidence of wants
C) Technology gap
D) Foreign trade deficit
Answer: B
Explanation: In barter system, exchange required double coincidence of wants.
4. Which is the most liquid form of money?
A) Fixed deposits
B) Currency
C) Gold
D) Bonds
Answer: B
Explanation: Currency (cash) is most liquid.
5. Fiat money is:
A) Backed by gold
B) Issued by government order without intrinsic value
C) Commodity money
D) Barter system money
Answer: B
Explanation: Fiat money = legal tender without intrinsic value.
6. Legal tender money means:
A) Money accepted by law for payment
B) Money accepted by banks only
C) Foreign currency
D) Plastic money
Answer: A
Explanation: Legal tender = law requires acceptance.
7. Credit money refers to:
A) Cheques and demand deposits
B) Gold coins
C) Currency notes
D) Treasury bills
Answer: A
Explanation: Credit money = bank deposits, cheques.
8. Near money means:
A) Cash only
B) Assets easily convertible into cash
C) Gold only
D) Barter goods
Answer: B
Explanation: Near money = assets easily convertible to cash (bonds, deposits).
9. Narrow money (M1) in India includes:
A) Currency + demand deposits + other deposits with RBI
B) Currency + fixed deposits
C) Currency + bonds + securities
D) Only currency
Answer: A
Explanation: M1 = currency + demand deposits + other deposits with RBI.
10. Broad money (M3) in India includes:
A) M1 + Time deposits
B) M1 only
C) Currency only
D) Bonds only
Answer: A
Explanation: M3 = M1 + time deposits with banks.
11. Money supply in India is measured by:
A) RBI
B) Ministry of Finance
C) NITI Aayog
D) SEBI
Answer: A
Explanation: RBI publishes money supply (M1, M2, M3, M4).
12. Which of the following is NOT a property of good money?
A) Divisibility
B) Portability
C) Perishability
D) Acceptability
Answer: C
Explanation: Money must not be perishable.
13. Currency notes in India are issued by:
A) Ministry of Finance
B) RBI
C) SBI
D) NITI Aayog
Answer: B
Explanation: RBI issues currency notes (except ₹1 note/coins issued by Govt).
14. Which is the standard measure of value in India?
A) Dollar
B) Gold
C) Rupee
D) Pound
Answer: C
Explanation: Indian rupee is the unit of account.
15. Plastic money refers to:
A) Counterfeit currency
B) Credit and debit cards
C) Only paper notes
D) Fake money
Answer: B
Explanation: Plastic money = cards.
16. Demand deposits are a form of:
A) Narrow money
B) Capital money
C) Commodity money
D) Token money
Answer: A
Explanation: Demand deposits = part of M1 (narrow money).
17. Which of the following is included in high-powered money (H)?
A) Currency + deposits with RBI
B) Currency only
C) Bonds + securities
D) Demand deposits only
Answer: A
Explanation: H = currency in circulation + reserves of banks with RBI.
18. Which of the following is NOT included in money supply (M3)?
A) Demand deposits
B) Time deposits
C) Foreign currency deposits
D) Currency
Answer: C
Explanation: Foreign deposits not included in domestic money supply.
19. Which type of money has intrinsic value?
A) Fiat money
B) Commodity money
C) Credit money
D) Plastic money
Answer: B
Explanation: Commodity money (gold, silver) has intrinsic value.
20. The Indian rupee is backed by:
A) Gold standard
B) Foreign currency standard
C) Managed fiat standard
D) Silver standard
Answer: C
Explanation: India follows managed fiat currency system.
21. Which of the following can create credit money?
A) RBI only
B) Commercial banks
C) Ministry of Finance
D) SEBI
Answer: B
Explanation: Commercial banks create credit money via lending.
22. Which function of money is most essential for economic growth?
A) Store of value
B) Medium of exchange
C) Unit of account
D) Standard of deferred payments
Answer: B
Explanation: Medium of exchange removes barter limitations → trade expansion.
23. Which of the following is included in M0 (monetary base)?
A) Currency in circulation + bankers’ deposits with RBI
B) Demand deposits with commercial banks
C) Time deposits
D) Bonds
Answer: A
Explanation: M0 = high-powered money.
24. Inflation erodes which function of money most?
A) Unit of account
B) Medium of exchange
C) Store of value
D) Standard of deferred payments
Answer: C
Explanation: Inflation reduces money’s ability to store value.
25. Which economist said “Money is what money does”?
A) Keynes
B) Adam Smith
C) Walker
D) Marshall
Answer: C
Explanation: Walker defined money by its functions.
26. The primary function of a commercial bank is:
A) Accepting deposits and granting loans
B) Printing currency
C) Collecting taxes
D) Issuing government bonds
Answer: A
Explanation: Commercial banks mainly accept deposits and lend money.
27. Which of the following is a secondary function of banks?
A) Granting loans
B) Creating credit
C) Providing agency and utility services
D) Accepting deposits
Answer: C
Explanation: Secondary functions include agency services (cheques, drafts, transfers) and utility services.
28. Credit creation by commercial banks depends on:
A) CRR and SLR requirements
B) Size of initial deposits
C) Cash reserves with banks
D) All of the above
Answer: D
Explanation: Higher reserves reduce lending capacity → credit creation depends on all these factors.
29. The ability of commercial banks to create credit is restricted by:
A) Cash Reserve Ratio (CRR)
B) Statutory Liquidity Ratio (SLR)
C) Demand for credit
D) All of the above
Answer: D
Explanation: All affect the credit-creating capacity of banks.
30. Scheduled commercial banks are listed in:
A) RBI Act, 1934 – Second Schedule
B) Banking Regulation Act, 1949 – First Schedule
C) Companies Act, 1956
D) SEBI Act, 1992
Answer: A
Explanation: Scheduled banks = included in Second Schedule of RBI Act, 1934.
31. Which of the following is NOT a type of commercial bank in India?
A) Public sector banks
B) Private sector banks
C) Cooperative banks
D) Development banks
Answer: D
Explanation: Development banks (NABARD, SIDBI) are not commercial banks.
32. Regional Rural Banks (RRBs) were established in India in:
A) 1969
B) 1975
C) 1982
D) 1991
Answer: B
Explanation: RRBs established in 1975 for rural credit.
33. Which of the following is a cooperative bank?
A) NABARD
B) Urban Cooperative Bank
C) EXIM Bank
D) IDBI
Answer: B
Explanation: Urban Cooperative Banks operate on cooperative principles.
34. The main objective of NABARD is:
A) Industrial finance
B) Agricultural and rural development finance
C) Export promotion
D) Urban infrastructure
Answer: B
Explanation: NABARD (1982) supports agriculture & rural credit.
35. Which bank is called “Banker’s Bank” in India?
A) State Bank of India
B) RBI
C) NABARD
D) HDFC Bank
Answer: B
Explanation: RBI acts as Banker’s Bank.
36. Which bank is called “Lender of Last Resort”?A) State Bank of India
B) NABARD
C) RBI
D) IMF
Answer: C
Explanation: RBI provides emergency liquidity support → Lender of Last Resort.
37. Which bank is India’s largest public sector bank?
A) Punjab National Bank
B) Bank of Baroda
C) State Bank of India
D) Canara Bank
Answer: C
Explanation: SBI is India’s largest PSB.
38. Which is the largest private sector bank in India (as of 2023)?
A) ICICI Bank
B) HDFC Bank
C) Axis Bank
D) Kotak Mahindra Bank
Answer: B
Explanation: HDFC Bank is the largest private bank.
39. When a bank accepts deposits and uses them to lend, it performs the function of:
A) Financial intermediary
B) Monetary authority
C) Wealth management
D) Fiscal agent
Answer: A
Explanation: Banks act as financial intermediaries between savers and borrowers.
40. Which type of bank provides long-term loans to industries?
A) Cooperative banks
B) Development banks
C) Commercial banks
D) RRBs
Answer: B
Explanation: Development banks (e.g., IFCI, IDBI) provide long-term finance.
41. Which of the following is NOT a function of commercial banks?
A) Issuing currency
B) Credit creation
C) Accepting deposits
D) Granting loans
Answer: A
Explanation: Currency is issued only by RBI/Government, not commercial banks.
42. Overdraft facility is provided by banks on:
A) Savings accounts
B) Fixed deposit accounts
C) Current accounts
D) Recurring deposit accounts
Answer: C
Explanation: Overdraft is usually given to current account holders.
43. Repo rate is the rate at which:
A) RBI lends to commercial banks
B) Commercial banks lend to RBI
C) Govt borrows from RBI
D) Public borrows from banks
Answer: A
Explanation: Repo = RBI lends short-term funds to banks.
44. Reverse repo rate is the rate at which:
A) RBI borrows from commercial banks
B) Commercial banks borrow from RBI
C) Govt borrows from public
D) Public borrows from banks
Answer: A
Explanation: Reverse repo = RBI borrows from banks.
45. Which of the following is a qualitative credit control tool of RBI?
A) Repo rate
B) CRR
C) SLR
D) Credit rationing
Answer: D
Explanation: Qualitative → targeted measures like credit rationing.
46. Statutory Liquidity Ratio (SLR) refers to:
A) Cash reserve banks must keep with RBI
B) Minimum % of deposits banks must keep in govt securities & approved assets
C) Minimum capital requirement for banks
D) CRR + Repo rate
Answer: B
Explanation: SLR = banks keep part of deposits in approved securities.
47. Cash Reserve Ratio (CRR) refers to:
A) Cash banks keep in vaults
B) Cash banks must deposit with RBI
C) Cash banks lend to govt
D) Cash kept as ATM reserves
Answer: B
Explanation: CRR = % of deposits maintained with RBI.
48. The process of converting illiquid assets into marketable securities is called:
A) Monetization
B) Securitization
C) Capitalization
D) Liberalization
Answer: B
Explanation: Securitization = packaging loans/assets into marketable securities.
49. Payment banks in India can:
A) Accept deposits up to ₹2 lakh
B) Provide full loans
C) Issue credit cards
D) Undertake foreign exchange
Answer: A
Explanation: Payment banks can accept limited deposits (₹2 lakh) but cannot lend.
50. Small Finance Banks are meant to:
A) Provide large industrial finance
B) Provide credit to small business, farmers, and unorganized sector
C) Finance international trade
D) Finance government projects
Answer: B
Explanation: Small Finance Banks → focus on priority sector lending to small borrowers.
51. Monetary policy is concerned with:
A) Government spending and taxation
B) Regulation of money supply and credit
C) Export and import policy
D) Labour welfare policy
Answer: B
Explanation: Monetary policy = management of money supply, credit, interest rates by central bank.
52. Which institution formulates monetary policy in India?
A) Ministry of Finance
B) Reserve Bank of India (RBI)
C) SEBI
D) NITI Aayog
Answer: B
Explanation: Monetary policy is framed and implemented by RBI.
53. The main objectives of monetary policy are:
A) Price stability
B) Economic growth
C) Employment generation
D) All of the above
Answer: D
Explanation: Monetary policy aims at stability, growth, and employment.
54. Quantitative tools of monetary policy include:
A) Repo rate, CRR, SLR, Open Market Operations
B) Credit rationing
C) Margin requirements
D) Consumer credit regulation
Answer: A
Explanation: Quantitative tools control overall money supply.
55. Qualitative tools of monetary policy include:
A) Repo rate
B) CRR
C) Selective credit controls (like credit rationing, margin requirements)
D) SLR
Answer: C
Explanation: Qualitative → directs credit flow to specific sectors.
56. RBI was established in:
A) 1934
B) 1935
C) 1947
D) 1950
Answer: B
Explanation: RBI started operations on 1 April 1935 under RBI Act, 1934.
57. RBI was nationalized in:
A) 1947
B) 1949
C) 1951
D) 1956
Answer: B
Explanation: RBI nationalized on 1 January 1949.
58. The primary function of RBI is:
A) Printing currency
B) Controlling monetary policy
C) Regulating banks
D) All of the above
Answer: D
Explanation: RBI controls currency, credit, and banking system.
59. The repo rate is used by RBI to:
A) Increase liquidity by lending to banks
B) Absorb liquidity from banks
C) Regulate foreign exchange
D) Fix fiscal deficit
Answer: A
Explanation: Repo = short-term lending rate of RBI to banks.
60. Reverse repo rate is used by RBI to:
A) Lend to commercial banks
B) Borrow from banks to absorb excess liquidity
C) Provide subsidies to govt
D) Control fiscal deficit
Answer: B
Explanation: Reverse repo = RBI borrows from banks, absorbing liquidity.
61. Open Market Operations (OMO) means:
A) Buying and selling of foreign currency
B) Buying and selling of govt securities in open market by RBI
C) Buying and selling of commodities
D) Buying and selling of gold
Answer: B
Explanation: OMO = RBI trades in govt securities to control liquidity.
62. CRR (Cash Reserve Ratio) helps RBI to:
A) Control liquidity by regulating banks’ cash with RBI
B) Fix lending rates
C) Manage foreign trade
D) Control inflation directly
Answer: A
Explanation: CRR = % of deposits banks must keep with RBI.
63. SLR (Statutory Liquidity Ratio) requires banks to hold:
A) Cash with RBI
B) Liquid assets like gold, approved govt securities
C) Foreign currency reserves
D) Loans to priority sectors
Answer: B
Explanation: SLR = banks must keep a portion of deposits in approved securities.
64. Bank Rate is the rate at which RBI:
A) Provides short-term loans to banks
B) Provides long-term loans to banks without collateral
C) Buys foreign exchange
D) Issues currency
Answer: B
Explanation: Bank rate = long-term lending rate of RBI.
65. The Marginal Standing Facility (MSF) allows banks to:
A) Borrow overnight funds from RBI at a rate higher than repo
B) Deposit excess funds with RBI
C) Buy foreign securities
D) Create unlimited credit
Answer: A
Explanation: MSF = overnight borrowing facility above repo rate.
66. Monetary Policy Committee (MPC) of India was constituted in:
A) 2012
B) 2014
C) 2016
D) 2018
Answer: C
Explanation: MPC formed in 2016 to target inflation.
67. The inflation target set under India’s monetary policy framework is:
A) 2% ± 1
B) 4% ± 2
C) 6% ± 3
D) 5% ± 1
Answer: B
Explanation: RBI’s target = 4% with ±2% band (2–6%).
68. Credit control is a function of:
A) RBI
B) Ministry of Finance
C) SEBI
D) Commercial banks
Answer: A
Explanation: RBI controls credit supply through monetary tools.
69. Which instrument of credit control is most direct?
A) Repo rate
B) Open Market Operations
C) CRR
D) Credit rationing
Answer: D
Explanation: Credit rationing directly restricts loans to certain sectors.
70. Inflationary situation is best controlled by:
A) Reducing CRR
B) Increasing repo and CRR
C) Increasing govt spending
D) Increasing money supply
Answer: B
Explanation: Higher repo & CRR absorb liquidity → controls inflation.
71. During deflation, RBI should:
A) Reduce repo rate and CRR
B) Increase CRR and SLR
C) Reduce govt expenditure
D) Sell govt securities
Answer: A
Explanation: Reducing repo/CRR injects liquidity → stimulates demand.
72. Priority sector lending in India requires banks to lend at least:
A) 20% of total credit
B) 30% of total credit
C) 40% of total credit
D) 50% of total credit
Answer: C
Explanation: Banks must lend 40% of Adjusted Net Bank Credit to priority sectors.
73. Which committee recommended inflation targeting in India?
A) Narasimham Committee
B) Urjit Patel Committee
C) Rangarajan Committee
D) Kelkar Committee
Answer: B
Explanation: Urjit Patel Committee (2014) suggested inflation targeting.
74. Liquidity Adjustment Facility (LAF) consists of:
A) Repo and Reverse Repo operations
B) CRR and SLR
C) Bank rate and MSF
D) Call money and term money
Answer: A
Explanation: LAF = repo + reverse repo.
75. When RBI increases the repo rate, it leads to:
A) Cheaper loans → more borrowing
B) Costlier loans → less borrowing
C) No impact on borrowing
D) Increase in government borrowing only
Answer: B
Explanation: Higher repo = loans become costlier, reducing borrowing → curbs inflation.
76. The Reserve Bank of India was established on the recommendation of:
A) Narasimham Committee
B) Hilton Young Commission
C) Urjit Patel Committee
D) Rangarajan Committee
Answer: B
Explanation: RBI was set up in 1935 based on the Hilton Young Commission (1926).
77. The RBI issues currency under which system?
A) Gold Standard
B) Proportional Reserve System
C) Minimum Reserve System
D) Full Convertibility System
Answer: C
Explanation: Since 1956, RBI follows Minimum Reserve System (₹200 crore: gold + forex).
78. Which note is issued directly by the Ministry of Finance, not RBI?
A) ₹10
B) ₹100
C) ₹500
D) ₹1
Answer: D
Explanation: Only ₹1 note & coins are issued by Govt of India.
79. The central banking functions in India are performed by:
A) State Bank of India
B) RBI
C) Ministry of Finance
D) NABARD
Answer: B
Explanation: RBI = India’s central bank.
80. Which bank is known as “Banker to the Government”?
A) SBI
B) NABARD
C) RBI
D) ICICI Bank
Answer: C
Explanation: RBI maintains govt accounts, issues loans → Banker to Govt.
81. The first Indian bank to be nationalized was:
A) PNB
B) SBI
C) Allahabad Bank
D) Imperial Bank of India
Answer: D
Explanation: Imperial Bank nationalized in 1955 → became SBI.
82. In which year were 14 major Indian banks nationalized?
A) 1949
B) 1955
C) 1969
D) 1980
Answer: C
Explanation: 1969 – 14 banks nationalized. Later, 6 more in 1980.
83. Which bank was merged with 5 associate banks in 2017?
A) ICICI Bank
B) SBI
C) PNB
D) Axis Bank
Answer: B
Explanation: SBI merged with 5 associates + Bharatiya Mahila Bank in 2017.
84. The Narasimham Committee (1991) is associated with:
A) Industrial reforms
B) Agricultural reforms
C) Banking sector reforms
D) Labour reforms
Answer: C
Explanation: Narasimham Committee recommended banking sector liberalization.
85. Priority Sector Lending (PSL) target for commercial banks is:
A) 20%
B) 30%
C) 40%
D) 50%
Answer: C
Explanation: Banks must lend 40% of ANBC to priority sectors.
86. The institution that regulates stock markets in India is:
A) RBI
B) SEBI
C) IRDA
D) Ministry of Finance
Answer: B
Explanation: SEBI (1992) regulates securities markets.
87. Which bank is called the “Apex bank” for agriculture and rural development?
A) RBI
B) NABARD
C) EXIM Bank
D) SIDBI
Answer: B
Explanation: NABARD (1982) = apex rural development bank.
88. Microfinance in India is mainly associated with:
A) Large industries
B) Self Help Groups (SHGs)
C) Foreign banks
D) RBI
Answer: B
Explanation: SHGs & NGOs promote microfinance.
89. The money multiplier in India is determined by:
A) Tax rates
B) Credit creation of banks
C) CRR and SLR
D) Government borrowing
Answer: C
Explanation: Higher CRR/SLR → lower money multiplier.
90. The largest component of money supply in India is:
A) Currency in circulation
B) Demand deposits
C) Time deposits
D) Gold reserves
Answer: C
Explanation: Time deposits (M3) form the largest share.
91. Which of the following is NOT a function of RBI?
A) Issuing currency
B) Regulating banks
C) Managing forex reserves
D) Providing long-term loans to industries
Answer: D
Explanation: Industrial loans = function of development banks, not RBI.
92. The Liquidity Adjustment Facility (LAF) includes:
A) Repo & Reverse Repo
B) CRR & SLR
C) Bank Rate & MSF
D) Call money rate
Answer: A
Explanation: LAF = repo + reverse repo operations.
93. India’s central monetary authority is:
A) SEBI
B) Finance Ministry
C) RBI
D) SBI
Answer: C
Explanation: RBI = central monetary authority.
94. Which Act governs the functioning of commercial banks in India?
A) RBI Act, 1934
B) Banking Regulation Act, 1949
C) Companies Act, 1956
D) Payment & Settlement Systems Act, 2007
Answer: B
Explanation: Banking Regulation Act, 1949 governs banks.
95. Who appoints the Governor of RBI?
A) RBI Board
B) Parliament
C) Government of India
D) President of India
Answer: C
Explanation: RBI Governor is appointed by Central Government.
96. The present inflation targeting framework in India is based on:
A) Wholesale Price Index (WPI)
B) Consumer Price Index (CPI)
C) GDP Deflator
D) Both WPI & CPI
Answer: B
Explanation: Since 2016, RBI targets inflation based on CPI.
97. “Financial Inclusion” aims to:
A) Increase GDP
B) Provide banking services to all sections of society
C) Increase tax collection
D) Privatize banks
Answer: B
Explanation: Financial inclusion = universal access to banking & credit.
98. The Jan Dhan Yojana primarily focuses on:
A) Agricultural subsidies
B) Opening zero-balance bank accounts
C) Industrial loans
D) Digital currency
Answer: B
Explanation: Pradhan Mantri Jan Dhan Yojana = basic bank accounts for all.
99. Digital payment systems in India are regulated by:
A) SEBI
B) NPCI under RBI
C) NITI Aayog
D) Ministry of Commerce
Answer: B
Explanation: NPCI (National Payments Corporation of India) under RBI manages UPI, RuPay, IMPS.
100. India launched its first digital currency (CBDC pilot) in:
A) 2018
B) 2020
C) 2022
D) 2023
Answer: C
Explanation: RBI launched CBDC pilot (Digital Rupee) in 2022.