Money & Banking

21. Consider the following statements in respect of the digital rupee :

Consider the following statements in respect of the digital rupee :

  • 1. It is a sovereign currency issued by the Reserve Bank of India (RBI) in alignment with its monetary policy.
  • 2. It appears as a liability on the RBI’s balance sheet.
  • 3. It is insured against inflation by its very design.
  • 4. It is freely convertible against commercial bank money and cash.

Which of the statements given above are correct ?

Join Our Telegram Channel
1 and 2 only
1 and 3 only
2 and 4 only
1, 2 and 4
This question was previously asked in
UPSC IAS – 2024
Download PDFAttempt Online
The correct answer is D, including statements 1, 2, and 4.
Statement 1 is correct. The digital rupee (CBDC) is envisioned as a digital form of India’s sovereign currency (the Rupee), issued directly by the Reserve Bank of India (RBI) in accordance with its monetary policy objectives.
Statement 2 is correct. Similar to physical currency, CBDC represents a direct liability of the central bank (RBI) to the holder. It is essentially a claim on the central bank.
Statement 3 is incorrect. The design of the digital rupee does not inherently provide insurance against inflation. Like physical currency, its purchasing power would be subject to macroeconomic factors and inflationary pressures managed by the RBI through monetary policy. Its value is pegged 1:1 with the physical rupee.
Statement 4 is correct. As a digital equivalent of physical currency, the digital rupee is intended to be freely convertible with other forms of money, such as commercial bank deposits (commercial bank money) and physical cash.
The RBI has launched pilot projects for both wholesale and retail versions of the digital rupee (e₹). CBDCs aim to provide benefits like efficiency, innovation, and financial inclusion, while also raising questions about privacy, security, and potential impact on the banking system.

Subscribe on YouTube

22. Consider the following statements : Statement-I : Syndicated lending s

Consider the following statements :
Statement-I :
Syndicated lending spreads the risk of borrower default across multiple lenders.
Statement-II :
The syndicated loan can be a fixed amount/lump sum of funds, but cannot be a credit line.
Which one of the following is correct in respect of the above statements ?

Join Our Telegram Channel
Both Statement-I and Statement-II are correct and Statement-II explains Statement-I
Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-I
Statement-I is correct, but Statement-II is incorrect
Statement-I is incorrect, but Statement-II is correct
This question was previously asked in
UPSC IAS – 2024
Download PDFAttempt Online
The correct answer is C, indicating that Statement-I is correct, but Statement-II is incorrect.
Statement-I is correct. Syndicated lending involves a group of banks or financial institutions pooling resources to provide a large loan to a single borrower. This arrangement spreads the risk of the borrower defaulting across multiple lenders, reducing the exposure for any individual participant.
Statement-II is incorrect. Syndicated loans can be structured in various forms. While term loans (fixed amount/lump sum) are common, syndicated facilities can also be structured as revolving credit facilities, which function like a credit line allowing the borrower to draw, repay, and redraw funds up to a specified limit over a period. Therefore, a syndicated loan *can* be a credit line.
Syndicated loans are commonly used for large corporate borrowings, project financing, and leveraged buyouts. The syndicate is typically led by one or more lead banks (arrangers) who manage the process.

Subscribe on YouTube

23. With reference to the Indian economy, “Collateral Borrowing and Lendin

With reference to the Indian economy, “Collateral Borrowing and Lending Obligations” are the instruments of :

Subscribe on YouTube
Bond market
Forex market
Money market
Stock market
This question was previously asked in
UPSC IAS – 2024
Download PDFAttempt Online
Collateral Borrowing and Lending Obligations (CBLO) were money market instruments introduced by the Clearing Corporation of India Ltd (CCIL) in 2003. CBLO represented an obligation by a borrower to return the borrowed funds at a specified future date and an obligation by a lender to return equivalent securities deposited as collateral by the borrower. It allowed market participants (like banks, financial institutions, mutual funds) to borrow and lend funds for short durations (typically overnight) against eligible securities held in electronic form. This function places CBLO firmly within the domain of the money market, which deals with short-term debt instruments.
CBLO was a short-term borrowing and lending instrument used in the Indian financial market with eligible securities as collateral.
CBLO was a significant instrument in the Indian money market for cash management and meeting reserve requirements until it was discontinued and replaced by the Tri-Party Repo (TREPS) system facilitated by CCIL in 2018-2019. TREPS serves a similar function as CBLO but with an added third party (CCIL or another clearing house) guaranteeing the settlement.

Join Our Telegram Channel

24. With reference to the rule/rules imposed by the Reserve Bank of India

With reference to the rule/rules imposed by the Reserve Bank of India while treating foreign banks, consider the following statements:

Subscribe on YouTube
  • There is no minimum capital requirement for wholly owned banking subsidiaries in India.
  • For wholly owned banking subsidiaries in India, at least 50% of the board members should be Indian nationals.

Which of the statements given above is/are correct ?

1 only
2 only
Both 1 and 2
Neither 1 nor 2
This question was previously asked in
UPSC IAS – 2024
Download PDFAttempt Online
The question concerns the rules imposed by the Reserve Bank of India (RBI) on foreign banks setting up operations in India, specifically regarding Wholly Owned Subsidiaries (WOS). Let’s evaluate the statements:
Statement 1: “There is no minimum capital requirement for wholly owned banking subsidiaries in India.” This statement is incorrect. RBI guidelines require foreign banks operating as WOS in India to maintain a minimum initial assigned capital (net worth) of ₹500 crore.
Statement 2: “For wholly owned banking subsidiaries in India, at least 50% of the board members should be Indian nationals.” This statement is correct. RBI guidelines for WOS stipulate that a majority of the board members (i.e., at least 50%) should be Indian nationals, and the Chairperson of the board should be an Indian national resident in India.
Therefore, only statement 2 is correct.
RBI permits foreign banks to operate in India through branches or by setting up Wholly Owned Subsidiaries (WOS). The WOS model is generally preferred by RBI as it provides greater regulatory oversight and ring-fences the Indian operations from potential problems faced by the parent entity abroad. Specific guidelines are in place for WOS regarding capital requirements, governance, priority sector lending, and branching.
The policy for WOS of foreign banks was introduced by the RBI to allow foreign banks greater flexibility in expanding their branch network in India compared to the restrictions faced by foreign bank branches. WOS are treated on par with domestic banks in terms of branching rules, although they have specific requirements regarding capital, governance, and prudential norms. The requirement for a majority of Indian directors is aimed at ensuring local understanding and responsiveness to the Indian market and regulatory environment.

Join Our Telegram Channel

25. Consider the following : Exchange-Traded Funds (ETF) Motor vehicles

Consider the following :

Subscribe on YouTube
  1. Exchange-Traded Funds (ETF)
  2. Motor vehicles
  3. Currency swap

Which of the above is/are considered financial instruments ?

Join Our Telegram Channel
1 only
2 and 3 only
1, 2 and 3 only
1 and 3 only
This question was previously asked in
UPSC IAS – 2024
Download PDFAttempt Online
The correct option is D.
A financial instrument is a monetary contract between parties. They are broadly classified as cash instruments (like currency, deposits, loans, bonds, stocks) or derivative instruments (like futures, options, swaps).
1. Exchange-Traded Funds (ETF): An ETF is a type of investment fund that trades on stock exchanges. It represents ownership in a portfolio of underlying assets. ETFs are securities and are considered financial instruments.
2. Motor vehicles: A motor vehicle is a physical asset (a tangible good). It is not a financial instrument. While financing related to buying a vehicle (like a car loan) or insuring it involves financial instruments, the vehicle itself is not one.
3. Currency swap: A currency swap is a derivative contract where two parties exchange principal and interest payments in different currencies. It is a type of financial derivative and thus a financial instrument.
Financial instruments facilitate the flow of capital and allocation of risk in the economy. They allow entities to raise funds, manage risk, and invest. Physical assets like vehicles, real estate, or commodities themselves are not financial instruments, although contracts related to their ownership or transfer (like property deeds, futures contracts on commodities) can be financial instruments.

26. In India, which of the following can trade in Corporate Bonds and Gove

In India, which of the following can trade in Corporate Bonds and Government Securities ?

  1. Insurance Companies
  2. Pension Funds
  3. Retail Investors

Select the correct answer using the code given below :

Join Our Telegram Channel
1 and 2 only
2 and 3 only
1 and 3 only
1, 2 and 3
This question was previously asked in
UPSC IAS – 2024
Download PDFAttempt Online
The correct option is D.
All three categories of investors can trade in Corporate Bonds and Government Securities in India.
1. Insurance Companies: Insurance companies are major investors in the debt market, including G-Secs and corporate bonds, primarily due to regulatory requirements to invest a certain percentage of their funds in approved securities and to match their long-term liabilities with long-term assets.
2. Pension Funds: Pension funds, such as EPFO and funds under the National Pension System (NPS), are also significant players in the debt market. They invest substantial amounts in G-Secs and corporate bonds as part of their long-term investment strategy to meet future pension obligations.
3. Retail Investors: Retail investors can invest in both government securities and corporate bonds. The RBI has introduced the RBI Retail Direct scheme to provide easier access for retail investors to G-Secs. Corporate bonds can be accessed by retail investors through stock exchange platforms, mutual funds, or direct placements, although participation might be lower compared to institutional investors or equity markets.
The debt market in India comprises government securities and corporate bonds. It caters to various types of investors ranging from large institutions to individual retail investors, each participating based on their investment objectives, risk appetite, and regulatory framework.

Subscribe on YouTube

27. Consider the following statements: 1. In India, Non-Banking Financia

Consider the following statements:

  • 1. In India, Non-Banking Financial Companies can access the Liquidity Adjustment Facility window of the Reserve Bank of India.
  • 2. In India, Foreign Institutional Investors can hold the Government Securities (G-Secs).
  • 3. In India, Stock Exchanges can offer separate trading platforms for debts.

Which of the statements given above is/are correct ?

Subscribe on YouTube
1 and 2 only
3 only
1, 2 and 3
2 and 3 only
This question was previously asked in
UPSC IAS – 2024
Download PDFAttempt Online
The correct option is D.
Statement 1 is incorrect. The Liquidity Adjustment Facility (LAF) is a tool used by the Reserve Bank of India (RBI) to inject or absorb liquidity into the banking system. It is primarily accessible to Scheduled Commercial Banks (SCBs). Non-Banking Financial Companies (NBFCs) do not have direct access to the LAF window.
Statement 2 is correct. Foreign Institutional Investors (FIIs), now largely categorized under Foreign Portfolio Investors (FPIs), are permitted by the RBI to invest in Government Securities (G-Secs) within prescribed limits and frameworks.
Statement 3 is correct. Stock exchanges in India, such as the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE), have established separate trading platforms specifically for debt instruments, including corporate bonds, government securities, State Development Loans, etc., to facilitate their trading.
RBI operates LAF through repurchase agreements (repos) and reverse repos. While NBFCs cannot access LAF, some large NBFCs may access funds from the banking system or the market, indirectly influenced by LAF rates. RBI also has other windows like Marginal Standing Facility (MSF) for banks and Standing Deposit Facility (SDF).

Join Our Telegram Channel

28. In the context of finance, the term ‘beta’ refers to

In the context of finance, the term ‘beta’ refers to

Join Our Telegram Channel
the process of simultaneous buying and selling of an asset from different platforms
an investment strategy of a portfolio manager to balance risk versus reward
a type of systemic risk that arises where perfect hedging is not possible
a numeric value that measures the fluctuations of a stock to changes in the overall stock market.
This question was previously asked in
UPSC IAS – 2023
Download PDFAttempt Online
In finance, ‘beta’ is a statistical measure that quantifies the sensitivity of an asset’s (like a stock) returns to the fluctuations of a relevant market index (like the overall stock market). It indicates the asset’s systematic risk relative to the market.
– Beta (β) is a measure of systematic risk, which is the risk inherent to the entire market or market segment.
– A beta of 1 implies the stock’s price moves in line with the market.
– A beta greater than 1 suggests the stock is more volatile than the market.
– A beta less than 1 suggests the stock is less volatile than the market.
– A beta of 0 implies no correlation with the market.
Beta is a key component in the Capital Asset Pricing Model (CAPM), which is used to calculate the expected return of an asset. It helps investors understand how much additional risk they are taking by investing in a specific stock compared to investing in the overall market. Beta does not measure unsystematic (or specific) risk, which can be diversified away.

Subscribe on YouTube

29. With reference to Central Bank digital currencies, consider the follow

With reference to Central Bank digital currencies, consider the following statements :

Join Our Telegram Channel
  • 1. It is possible to make payments in a digital currency without using US dollar or SWIFT system.
  • 2. A digital currency can be distributed with condition programmed into it such as a time-frame for spending it.

Which of the statements given above is/are correct?

1 only
2 only
Both 1 and 2
Neither 1 nor 2
This question was previously asked in
UPSC IAS – 2023
Download PDFAttempt Online
Both statements are correct. Central Bank Digital Currencies (CBDCs) offer capabilities that can bypass traditional international payment systems like SWIFT and can potentially incorporate features like programmability.
– CBDCs allow for direct digital payment rails that do not necessarily rely on intermediary banks or existing international systems like SWIFT. This can facilitate faster and potentially cheaper cross-border transactions without requiring conversion to a specific reserve currency like the US dollar for routing.
– CBDCs can be designed with built-in rules or conditions, making them ‘programmable’. This could include setting time limits for spending (expiry dates), restricting usage to specific goods or services, or triggering payments upon fulfillment of certain conditions.
CBDCs are digital forms of a country’s fiat currency issued by the central bank. They are distinct from cryptocurrencies like Bitcoin (which are decentralized) and stablecoins (which are typically issued by private entities and pegged to an asset). Many central banks globally are researching and piloting CBDCs for various potential benefits, including payment system efficiency, financial inclusion, and monetary policy implementation.

Subscribe on YouTube

30. Consider the following statements : Statement-I: Switzerland in one of

Consider the following statements :
Statement-I: Switzerland in one of the leading exporters of gold in terms of value.
Statement-II: Switzerland has the second largest gold reserves in the world.
Which one of the following is correct in respect of the above statements?

Subscribe on YouTube
Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-I
Both Statement-I and Statement-II are correct and Statement-II is not the correct explanation for Statement-I
Statement-I is correct but Statement-II is incorrect
Statement-I is incorrect but Statement-II is correct
This question was previously asked in
UPSC IAS – 2023
Download PDFAttempt Online
Statement-I is correct but Statement-II is incorrect.
Switzerland is a major global hub for gold refining and trading and is indeed one of the leading exporters of gold by value. However, Switzerland does not have the second largest official gold reserves in the world. Countries like the USA, Germany, Italy, and France hold significantly larger gold reserves.
Switzerland’s prominence in the gold market is due to its advanced refining capacity and role as a transit country. It refines a large portion of the world’s newly mined gold and scrap gold before it is exported for distribution globally. As of recent data, the largest holders of official gold reserves are the United States, followed by Germany, Italy, and France. Switzerland’s reserves, while substantial, rank lower down the list (typically outside the top 5).

Join Our Telegram Channel
Page 1Page 2Page 3Page 4Page 5