What is the current inflation target mandated for the Reserve Bank of India (RBI) by the Government of India, as of 2026?
A 2% with a band of +/- 1%.
B 4% with a band of +/- 2%.
C 6% with a band of +/- 2%.
D 8% with no specific band.
Answer: B
The Government of India, in consultation with the RBI, has set a retail inflation target of 4% with a tolerance band of +/- 2% (i.e., 2% to 6%) for the period up to March 31, 2026. This framework guides the RBI's monetary policy decisions.
2.
Amidst global economic volatility in 2026, which of the following factors is most likely to contribute to inflationary pressures in India?
A A significant decrease in global crude oil prices.
B A robust monsoon leading to record agricultural output.
C Supply chain disruptions and elevated international commodity prices.
D A sustained appreciation of the Indian Rupee against major currencies.
Answer: C
Global supply chain disruptions and high international commodity prices (like oil, metals, and food) directly feed into domestic inflation through imported inflation and increased input costs for industries, making them significant contributors to inflationary pressures.
3.
What is the primary monetary policy tool the Reserve Bank of India (RBI) uses to manage inflationary trends in the Indian economy as of 2026?
A Fiscal policy adjustments by the government.
B Adjusting the Repo Rate.
C Direct price controls on essential commodities.
D Increasing government spending on infrastructure projects.
Answer: B
The Repo Rate is the key policy rate through which the RBI signals its monetary policy stance. Adjusting it influences lending rates in the economy, thereby impacting money supply and inflation, making it the primary tool for inflation management.
4.
As of 2026, which of the following sectors is NOT among the key sectors covered under the enhanced Production Linked Incentive (PLI) scheme?
A Automobiles and Auto Components.
B Advanced Chemistry Cell (ACC) Battery.
C Textiles and Apparel.
D Primary Agricultural Produce Export.
Answer: D
The PLI scheme covers various manufacturing sectors like automobiles, electronics, pharmaceuticals, textiles, food processing, white goods, etc., to boost domestic production. While food processing is covered, 'Primary Agricultural Produce Export' as a standalone category is not a direct focus of the manufacturing-centric PLI scheme.
5.
How does the Production Linked Incentive (PLI) scheme typically incentivize manufacturers?
A By offering interest-free loans for setting up new factories.
B By providing a percentage of incremental sales from products manufactured in India.
C By granting direct tax exemptions to all participating companies.
D By subsidizing the cost of imported machinery for manufacturing.
Answer: B
The PLI scheme offers incentives, typically calculated as a percentage of incremental sales (over a base year) of manufactured goods, to eligible companies for a period of 5-7 years, encouraging higher production volumes.
6.
What is the core objective of the Production Linked Incentive (PLI) scheme, as enhanced and implemented by the Indian government in 2026?
A To reduce India's import dependency across all sectors.
B To boost domestic manufacturing, create jobs, and make Indian industries globally competitive.
C To provide direct financial aid to small and medium enterprises (SMEs) only.
D To encourage the export of raw materials from India.
Answer: B
The PLI scheme aims to incentivize domestic manufacturing in key sectors, attract investments, enhance India's manufacturing capabilities and exports, and create employment opportunities, thereby making Indian industries globally competitive and reducing reliance on imports.
7.
Which of the following provisions is a crucial part of RBI's digital lending norms aimed at enhancing borrower protection regarding loan terms and data usage?
A Mandatory integration of all digital lending apps with the UPI platform.
B A 'cooling-off' period for borrowers to exit the loan with principal repayment without penalty.
C Allowing LSPs to access all personal data on a borrower's device.
D Capping the maximum interest rate at 10% for all digital loans.
Answer: B
The RBI guidelines include a provision for a 'cooling-off' or 'look-up' period during which borrowers can exit the loan by repaying the principal amount without penalty, if they decide not to proceed with the loan. This enhances borrower protection and flexibility.
8.
According to the RBI's digital lending guidelines, how must loan disbursements and repayments be handled to ensure transparency and direct accountability?
A Directly between the borrower and the Lending Service Provider (LSP).
B Directly into the borrower's bank account from the Regulated Entity (RE) and vice-versa for repayments.
C Through a third-party escrow account managed by the LSP.
D Any method agreed upon by the borrower and the LSP.
Answer: B
A key guideline mandates that loan disbursements must be made directly into the borrower's bank account by the Regulated Entity (RE), and repayments must also be made directly to the RE, without any pass-through via Lending Service Providers (LSPs), to enhance transparency.
9.
What is the primary objective behind the Reserve Bank of India's (RBI) tightened digital lending norms, effective as of 2026?
A To boost the profitability of digital lending platforms.
B To protect borrowers from unethical lending practices and over-indebtedness.
C To encourage foreign investment in the digital lending sector.
D To reduce the overall volume of digital loans disbursed.
Answer: B
The RBI's tightened norms primarily aim to safeguard borrowers from predatory lending practices, exorbitant interest rates, and issues like data privacy and aggressive recovery methods, thereby preventing over-indebtedness and ensuring fair practices.
