Banking & Finance MCQs

The RBI is piloting two versions of the e-Rupee: e₹-W (Wholesale) for interbank settlements and e₹-R (Retail) for general public use.

The Monetary Policy Committee (MPC) is a six-member committee, headed by the RBI Governor, that is entrusted with the task of fixing the benchmark policy interest rate (repo rate) to achieve the inflation target.

An increase in the Repo Rate makes borrowing more expensive for commercial banks, which in turn leads to higher lending rates for consumers and businesses. This reduces money supply, curbs demand, and helps in bringing down inflation, but can also slow down economic activity.

The Repo Rate is the key policy rate at which the RBI lends money to commercial banks, and it is the primary tool used to influence liquidity and control inflation.

The cooling-off period allows borrowers to exit the loan by repaying the principal amount without any penalty or charges within a specified period, typically 1-3 days, if they decide not to proceed with the loan.

The guidelines primarily cover Regulated Entities (REs) like banks and NBFCs, and the Lending Service Providers (LSPs) that act on their behalf in the digital lending ecosystem.

The RBI mandates that the loan disbursement must be made directly into the borrower's bank account, without any pass-through to the LSP or any other third party.

The government's consolidation drive, particularly in 2019-2020, led to the merger of several PSBs, significantly reducing their total number from 27 in 2017 to 12 by April 2020.

Recapitalization involves injecting fresh capital into banks to strengthen their balance sheets, ensure compliance with capital adequacy norms (like Basel III), absorb potential losses from NPAs, and enable them to lend more, thereby supporting economic growth.

The primary objective of the PSB mergers was to consolidate smaller, weaker banks into larger, more robust entities capable of competing globally, improving efficiency, and enhancing their lending capacity.