The Reserve Bank of India Questions and Answers

Answer: B

Correct answer: State Bank of India

The Imperial Bank of India became the State Bank of India on 1 July 1955, on nationalisation under the State Bank of India Act 1955.

The distinction from the Reserve Bank is worth keeping clear, since the first option offers it. The RBI is the central bank, founded separately in 1935 and nationalised in 1949; SBI is a commercial bank that the RBI regulates. The Imperial Bank had performed some quasi-central-banking functions before 1935, which is the source of the confusion.

Answer: C

Correct answer: Low rate of interest in the initial period which goes up subsequently

A teaser loan carries a low fixed rate for the first year or two and then reverts to the higher prevailing rate, so the borrower's instalment rises after the introductory period ends.

The risk is that eligibility is assessed on the low initial instalment rather than on the one that will follow, so a borrower who can afford the teaser may not be able to afford the reset. That is precisely the pattern the United States subprime crisis exposed, and it is why the RBI raised the provisioning requirement on such loans.

Answer: C

State Governments need to maintain minimum Rs 40 crore balances on every Friday with RBI.

Answer: C

In order to boost credit to export sector, it has been decided to enhance the sanctioned limit, for classification of export credit under PSL, from Rs 250 million per borrower to Rs 400 million per borrower

Answer: A

Correct answer: 1935

The Reserve Bank began operations on 1 April 1935, under the Reserve Bank of India Act 1934, following the recommendation of the Hilton Young Commission of 1926.

Three dates cluster here and are worth separating: 1934 for the Act, 1935 for the opening, and 1949 for nationalisation. The Bank started as a shareholders' institution with its central office in Calcutta, moved to Bombay in 1937, and passed into full Government ownership on 1 January 1949.

Answer: C

Correct answer: Bengaluru

The Reserve Bank has four regional offices, at Mumbai, New Delhi, Kolkata and Chennai, each headed by a Regional Director.

Bengaluru has a regional office of the ordinary kind, as do many state capitals, but not one of the four regional headquarters. The four correspond to the four zones the Bank divides the country into for administrative purposes - western, northern, eastern and southern - and the same fourfold division gives the four zonal training centres.

Answer: D

Correct answer: Both A and B

The Reserve Bank is a member of the Asian Clearing Union, the arrangement through which participating central banks settle intra-regional trade payments in a common unit, economising on hard currency.

India is also a member of the International Monetary Fund, and the RBI is the designated fiscal agency and depository for the Fund's dealings with India. The Commonwealth Bank of Australia is a commercial bank, not a body a central bank could be a member of - the name's resemblance to a public institution is a historical relic.

Answer: A

Under the standardised approach for Credit Risk Management, consumer credit, including personal loans and credit card receivables attract a higher risk weight of 125 per cent or higher, if warranted by the external rating of the counterparty. On a review, it has been decided by RBI to reduce the risk weight for consumer credit, including personal loans, but excluding credit card receivables, to 100%

Answer: B

Correct answer: Tiger

The Reserve Bank of India’s seal shows a tiger standing before a palm tree. The design descends from the East India Company’s Double Mohur, which paired a palm tree with a lion. When the Bank was established in 1935 its founders wanted an emblem that carried the continuity of that older coinage but read as distinctly Indian, so the lion was replaced by the tiger - an animal with no imperial associations and, later, India’s national animal. The palm tree was retained from the original. Proposals to use the Bank’s own building or the East India Company arms unchanged were both set aside in favour of this design. The keyed option in this record read “Panther”, which names the wrong animal; it has been corrected.

Answer: A

Correct answer: 1955

The Imperial Bank of India was nationalised and renamed the State Bank of India on 1 July 1955, under the State Bank of India Act 1955.

The change followed the All-India Rural Credit Survey Committee's finding that rural India was almost entirely without institutional credit. A state-owned bank with a nationwide network was to extend banking where a purely commercial institution had no incentive to go. The Imperial Bank had itself been formed in 1921 from the three Presidency Banks of Bengal, Bombay and Madras.