Digital Banking and E-Banking Questions and Answers

Answer: C

Correct answer: RBI lends short term money to banks against securities

The repo rate is the rate at which the RBI lends short-term funds to banks against government securities sold to it with an agreement to repurchase. It is the policy rate: raising it makes bank funding dearer, tightening credit, and lowering it does the reverse.

The reverse repo rate is the mirror transaction, at which the RBI absorbs surplus liquidity by borrowing from banks - which is what the first option describes. The rate at which the RBI rediscounts eligible bills is the bank rate, a distinct instrument now aligned with the marginal standing facility.

Answer: D

Correct answer: Both (b) and (c)

Classified according to law, Indian banks are either scheduled or non-scheduled. A scheduled bank is one included in the Second Schedule to the Reserve Bank of India Act, 1934, which requires paid-up capital and reserves of at least ₹5 lakh and that its affairs not be conducted to the detriment of depositors.

Inclusion brings both privilege and obligation: access to RBI refinance and to the clearing system, together with the duty to maintain the cash reserve ratio. Everything outside the Schedule is non-scheduled. Private banks are a classification by ownership, not by law.

Answer: D

Bharat Interface for Money (BHIM) provides fast, secure, reliable medium to make digital payments through your mobile phone using UPI (Unified Payment Interface) platform via Mobile App and USSD (Unstructured Supplementary Service Data) platform via *99# service.
In a day (24 hours), a maximum of Rs 20,000 can be transferred, and a single transaction allows maximum of Rs 10,000 to be transferred.
BHIM framework allows its usage without internet also. - thorugh SMS - BHIM framework *99# works without internet.
The limit for USSD has currently been set at Rs. 5,000 per day.

Answer: D

Correct answer: Book keeping

Book keeping is not one of the three pillars. The Basel II framework, on which India's revised capital adequacy regime was based, rests on minimum capital requirements, supervisory review and market discipline.

The first sets the capital a bank must hold against credit, market and operational risk. The second requires supervisors to assess whether a bank's own capital assessment is adequate for its risk profile. The third obliges disclosure sufficient for the market to form its own judgement. Book keeping is an accounting function that underlies all three but is not a pillar of the framework.

Answer: C

Correct answer: Tax rates

Tax rates are an instrument of fiscal policy, set by the government in the budget. They influence aggregate demand and disposable income, but they are not a tool the central bank uses to control credit.

Open market operations and the cash reserve ratio are both monetary instruments operated by the RBI, working directly on the liquidity available to banks for lending. The distinction between the two policy domains - fiscal in the government's hands, monetary in the central bank's - is what the question tests.

Answer: C

Correct answer: Times Bank and HDFC Bank

The merger of Times Bank with HDFC Bank, announced in 1999 and completed in February 2000, is the one usually cited as the first merger-and-acquisition activity in Indian banking after liberalisation. It was the first time two of the new-generation private banks licensed in the post-1991 era combined voluntarily, in a share-swap deal, rather than one being rescued by direction of the authorities. The other options all come later: the reverse merger of ICICI Ltd into ICICI Bank was completed in 2002, and Global Trust Bank was amalgamated with Oriental Bank of Commerce in 2004 after GTB failed - so neither could be the first. New Bank of India was merged into Punjab National Bank in 1993, which is earlier, but that was a compulsory amalgamation ordered by the Government under the Banking Regulation Act to deal with a loss-making bank, not market-driven M&A activity. The keyed answer in this record was ICICI, which is ruled out by date alone; it has been corrected.

Answer: C

Correct answer: IDFC

The Infrastructure Development Finance Company was set up in 1997 specifically to support infrastructure financing, and take-out finance is one of the instruments it provided. Under such an arrangement a bank makes the initial long-term loan and IDFC agrees in advance to take the exposure onto its own books after an agreed period.

This addresses the asset-liability mismatch that makes banks reluctant to lend for fifteen or twenty years against deposits of two or three: the bank knows at the outset when the loan will leave its balance sheet.

Answer: B

Correct answer: Immediate Payment Service

IMPS offers instant interbank transfer at any hour, including holidays, through mobile, internet and ATM channels. It was launched by NPCI in 2010 and filled the round-the-clock gap that NEFT and RTGS then left.

Answer: C

Correct answer: DBS Bank

DBS Bank launched digibank in India in 2016, the country's first mobile-only bank - an account opened and operated entirely through a smartphone application, with no branch, no forms and no signature. Onboarding used Aadhaar-based biometric verification at partner outlets, and the service ran on a paperless, signatureless, branchless model.

DBS is a Singapore-headquartered bank, and India was chosen as the launch market for the concept. The other banks listed have substantial mobile offerings, but each sits alongside a conventional branch network rather than replacing it.

Answer: D

Correct answer: Nationalized Banks

The capital adequacy norms of 1996 are given in the standard texts as applying to the nationalised banks, extending to them the Basel-based framework the RBI had begun introducing from 1992 on the Narasimham Committee's recommendation.

The framework requires a bank to hold capital in proportion to its risk-weighted assets, so that a bank taking greater risk must be funded by more of its own capital and less by depositors' money. It has since been extended and tightened across the banking system under successive Basel accords.