Digital Banking and E-Banking Questions and Answers

Answer: A

Correct answer: 1765

The savings bank movement is traced to Hamburg in 1765, where an institution was established to receive the small savings of working people - a class the merchant banks of the day had no interest in serving.

The idea was social as much as financial: to give the poor a safe place for small sums, encourage thrift and provide some protection against destitution. It spread through Germany and then across Europe, and the same purpose lies behind the later post office savings banks and, in India, behind much of what nationalisation in 1969 set out to achieve.

Answer: C

Correct answer: Airtel Payments Bank

Airtel Payments Bank was the first payments bank to begin operations in India, launching a pilot in Rajasthan in late 2016 and going nationwide in January 2017. India Post Payments Bank and Paytm Payments Bank followed later in 2017, and Fino Payments Bank the same year.

Payments banks were created by the RBI to widen access: they may accept deposits up to a prescribed limit per customer and offer payments and remittance services, but they may not lend, which is the essential difference between them and a Small Finance Bank.

Answer: D

Correct answer: National Payments Corporation of India

NPCI was set up in 2008 as an umbrella organisation for retail payments, promoted by a group of banks under the guidance of the RBI and the Indian Banks’ Association. The RBI regulates it but does not operate these systems itself.

Answer: D

Correct answer: All of the above

All three statements describe commercial paper correctly. It is an unsecured money market instrument issued in the form of a promissory note, backed by nothing but the issuer's standing - which is why only highly rated corporates can issue it, and why it is a route for them to raise short-term funds more cheaply than by bank borrowing.

From the other side of the market it gives investors an additional short-dated instrument to hold. In India it is issued at a discount to face value with maturities from seven days to one year, and issuers must meet minimum credit rating and net worth conditions.

Answer: D

Correct answer: To supply input to farmers

Supplying inputs to farmers - seed, fertiliser, implements - is not a banking function. A bank finances the purchase of those inputs by lending, but the supply itself is the business of cooperative societies, agricultural marketing bodies and dealers.

Accepting deposits and granting advances are the two defining functions of a bank. Waiving loans is not a function in the same sense, but banks do execute waivers under government schemes, so it is not the intended answer; supplying goods is outside the business of banking altogether.

Answer: B

Correct answer: Internet Banking

E-banking is used synonymously with internet banking - operating an account through the bank's website or application, over the internet.

Tele-banking is a distinct and older channel, conducted by telephone through an interactive voice response system or an agent, and it does not use the internet at all. The two are sometimes grouped together under electronic banking in a broad sense, but the term as commonly used, and as the question intends, points to banking over the internet.

Answer: A

Correct answer: Corporate securities

Corporate securities - shares and debentures - are marketable: they are transferable and can be bought and sold on a stock exchange, so the holder can realise them before maturity at a market price.

The other three are non-marketable. A bank deposit, a deposit with a company and a post office certificate are all claims against a specific institution that cannot be traded; they can only be held to maturity or, at best, prematurely encashed with the issuer, usually with a penalty. The distinction is liquidity through a market as against liquidity only through the issuer.

Answer: A

Correct answer: D.P. Operation

Depository Participant operations are a fee-based, not a fund-based, activity. The bank holds and transfers securities in dematerialised form on the customer's behalf and earns account maintenance and transaction charges; none of its own funds is committed and no asset or liability is created on its balance sheet.

The other three are fund-based. Deposits create a liability, loans and bill discounting create assets, and each involves the actual deployment or receipt of the bank's funds. The distinction matters because fund-based business carries credit and liquidity risk while fee-based business does not.

Answer: D

Correct answer: Both (A) and (R) are true

Both statements hold. Cash has increasingly given way to cards and to electronic transfers, and clearing now runs over telecommunication networks, with satellite links long used to reach places terrestrial networks did not.

The RBI has actively encouraged the shift, building RTGS and NEFT, promoting the National Payments Corporation of India and the UPI and IMPS systems built on it, and setting targets for digital transaction volumes. Whether the reason fully explains the assertion is another matter - technology and consumer behaviour drove much of it - but the option set here asks only whether both are true.

Answer: D

Correct answer: All of the above

All three describe the contribution of the specialised financial institutions. They have been an important source of long-term finance to industry, filling the gap left by commercial banks whose deposits are short-term. They have supported small-scale industry and projects in backward areas, often on concessional terms under regional development policy.

And they have backed new and small entrepreneurs who lacked the collateral and track record commercial lenders require. That developmental role - accepting risk and long tenor the market would not - is precisely why they were created rather than left to the banks.