Banking & Finance MCQs - 2026-04-22

Contagion effect refers to the risk that the failure or distress of one financial institution (like an NBFC) can spread to others, potentially destabilizing the entire financial system.

Strengthening the NBFC sector involves ensuring they have adequate capital to absorb potential losses and sufficient liquidity to meet their obligations, often through enhanced norms.

NBFCs play a crucial role in extending credit to underserved segments and contributing to financial inclusion, making their strengthening vital for economic growth.

The guidelines place the onus on regulated entities (banks and NBFCs) to ensure that their digital lending operations, including those outsourced to third parties, comply with the stipulated norms.

A crucial aspect of the guidelines is the requirement for lenders to clearly disclose all applicable charges, fees, and the Annual Percentage Rate (APR) to the borrower before the loan is disbursed.

The new guidelines aim to bring more transparency to digital lending processes and ensure fair treatment of borrowers, addressing concerns about predatory lending practices.

RBI reports often highlight contributions from various sectors, including services, manufacturing, and retail loans, to the overall robust credit growth.

Robust credit growth often signifies that businesses and individuals are borrowing more, which can lead to increased spending, investment, and overall economic expansion.

Recent RBI reports have indicated a strong and consistent upward trend in bank credit growth, reflecting increased economic activity and demand for loans.