Indian Banking System Quiz

The Indian banking system is the foundation of the country’s financial stability and economic growth. For UPSC aspirants, it’s an essential topic under the Indian Economy section.
Test your knowledge with this quick multiple-choice quiz on the Banking System in India, covering RBI, monetary tools, financial inclusion, and key banking institutions — with explanations for each answer.

Q1. Which of the following is not a function of the Reserve Bank of India (RBI)?

A. Issuing currency notes

B. Acting as the banker to the government

C. Managing foreign exchange reserves

D. Providing loans directly to individuals

Q2. Which of the following was the first bank established in India?

A. Bank of Hindustan

B. State Bank of India

C. Allahabad Bank

D. Punjab National Bank

Q3. The term ‘Repo Rate’ refers to:

A. Rate at which banks borrow from the public

B. Rate at which RBI lends to commercial banks

C. Rate at which RBI borrows from commercial banks

D. Rate charged by banks on consumer loans

Q4. Which of the following committees recommended the establishment of Regional Rural Banks (RRBs)?

A. Narasimham Committee

B. Kelkar Committee

C. Narayan Committee

D. Narsimhan Working Group (1975)

Q5. What does the term ‘CRR’ (Cash Reserve Ratio) mean?

A. The ratio of total deposits that banks keep with RBI as cash reserves

B. The ratio of cash held by the bank in its vaults

C. The interest rate offered on savings deposits

D. The ratio of foreign exchange held by the RBI

Q6. The Banking Regulation Act, 1949 is applicable to which of the following?

A. Only commercial banks

B. Only cooperative banks

C. All banking companies in India

D. Only foreign banks

Q7. The concept of Priority Sector Lending (PSL) was introduced to ensure:

A. High profits for private banks

B. More investment in large industries

C. Adequate credit flow to weaker sections and neglected sectors

D. Foreign investment in the banking sector

Q8. Which of the following statements about Scheduled Banks is correct?

A. They are included in the Second Schedule of the RBI Act, 1934

B. They cannot borrow from RBI

C. They are prohibited from issuing cheques

D. They operate only in rural areas

Q9. Which bank is known as the Banker’s Bank in India?

A. State Bank of India

B. Reserve Bank of India

C. NABARD

D. ICICI Bank

Q10. The Nationalisation of major banks in India took place in which year?

A. 1949

B. 1969

C. 1971

D. 1980

Q11. The primary objective of the Reserve Bank of India’s monetary policy is:

A. Increasing exports

B. Controlling inflation and maintaining price stability

C. Providing direct loans to industries

D. Promoting foreign trade

Q12. The NABARD was established in which year?

A. 1975

B. 1982

C. 1988

D. 1991

Q13. The Lead Bank Scheme was introduced following the recommendations of which committee?

A. Narasimham Committee

B. Gadgil Committee

C. Narsimhan Working Group

D. Sivaraman Committee

Q14. Which among the following is the largest commercial bank in India?

A. Punjab National Bank

B. HDFC Bank

C. State Bank of India

D. Bank of Baroda

Q15. The term ‘Open Market Operations (OMO)’ refers to:

A. Buying and selling of government securities by RBI

B. Lending by commercial banks to individuals

C. Buying of foreign currency by the government

D. None of the above

Q16. What is the main purpose of the Basel Norms in banking?

A. Promoting agricultural credit

B. Ensuring adequate capital and reducing banking risks

C. Enhancing employee welfare in banks

D. Regulating interest rates

Q17. The Financial Inclusion initiative aims to:

A. Provide insurance to rich households

B. Bring the weaker sections into the formal banking system

C. Promote foreign banks in India

D. Reduce government spending

Q18. Which of the following banks is specifically set up to finance and promote exports and imports in India?

A. SIDBI

B. NABARD

C. EXIM Bank

D. IFCI

Q19. Which of the following statements is true about the Payments Banks in India?

A. They can provide loans to individuals

B. They can issue credit cards

C. They can accept deposits up to ₹2 lakh per customer

D. They cannot provide any banking service

Q20. The Deposit Insurance and Credit Guarantee Corporation (DICGC) insures:

A. Deposits of government only

B. Only fixed deposits above ₹10 lakh

C. Deposits of all bank customers up to ₹5 lakh

D. Only deposits in cooperative banks

indian banking system quiz

Indian Banking System Quiz

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