Free Banking Exam Question and Answers — Questions and Answers
Question 1: Which public sector bank among the following has the most locations abroad?
- Corporation Bank
- Punjab National Bank
- Bank of Baroda (Correct answer)
- Bank of India
Correct answer: Bank of Baroda
As of various reports and historical data, Bank of Baroda has consistently maintained the largest international presence among Indian public sector banks. It operates a significant network of branches, subsidiaries, and joint ventures across numerous countries, facilitating international banking and trade for its customers.
Question 2: Only one merger of public sector banks occurred between -
- Punjab National Bank and Bank of Rajasthan
- Allahabad Bank and United Bank of India
- Punjab National Bank and New Bank of India (Correct answer)
- Bank of India and New Bank of India
Correct answer: Punjab National Bank and New Bank of India
The merger of New Bank of India with Punjab National Bank in 1993 was a significant event in Indian banking history. It was one of the earliest and most notable mergers involving public sector banks, aimed at strengthening the banking sector. This particular merger set a precedent for future consolidations within the Indian public sector banking landscape.
Question 3: Which of the aforementioned banks did Mahatma Gandhi open in 1919?
- Union Bank of India (Correct answer)
- State Bank of Saurashtra
- Bank of Baroda
- Bank of Maharashtra
Correct answer: Union Bank of India
Mahatma Gandhi, the father of the Indian nation, inaugurated the Union Bank of India in 1919. This historical event is a notable part of the bank's legacy, connecting it directly to a pivotal figure in India's independence movement. His presence at the opening underscored the bank's importance in the context of India's economic development.
Question 4: Which of the following banks has the most locations, after State Bank of India?
- Canara Bank
- Bank of India
- Andhra Bank
- Punjab National Bank (Correct answer)
Correct answer: Punjab National Bank
State Bank of India (SBI) is the largest bank in India with the most extensive branch network. Among other public sector banks, Punjab National Bank (PNB) typically ranks second in terms of the number of domestic branches, reflecting its wide reach and significant presence across the country, serving a vast customer base.
Question 5: What state has passed legislation regulating contract farming?
- Tamil Nadu (Correct answer)
- Andhra Pradesh
- Jharkhand
- Andhra Pradesh
Correct answer: Tamil Nadu
Tamil Nadu was one of the pioneering states in India to enact specific legislation for contract farming. The Tamil Nadu Agricultural Produce and Livestock Contract Farming and Services (Promotion and Facilitation) Act, 2019, provides a legal framework to protect the interests of both farmers and sponsors in contract farming arrangements, ensuring fair practices and dispute resolution.
Question 6: What interest rates do banks charge for teaser loans?
- What interest rates do banks charge for teaser loans?
- Higher rate of interest in the initial period which goes down subsequently
- Low rate of interest in the initial period which goes up subsequently (Correct answer)
- Floating rate of interest charged by banks
- Rate of interest which is competitively changed in relation to other banks
Correct answer: Low rate of interest in the initial period which goes up subsequently
Teaser loans are characterized by an attractive, low interest rate offered for an initial period, typically to entice borrowers. After this introductory period, the interest rate significantly increases, often reverting to a higher, variable rate. This structure can make the loan appear more affordable upfront but potentially more expensive in the long run once the 'teaser' rate expires.
Question 7: Which of the following phrases is relevant to the banking industry?
- Zero Hour
- Sedimentary
- Input devices
- Interest rate swap (Correct answer)
Correct answer: Interest rate swap
An interest rate swap is a derivative contract where two parties exchange interest payments based on a notional principal amount. This financial instrument is a common tool used in the banking industry for managing interest rate risk or speculating on future interest rate movements. The other options are unrelated to banking or finance.
Question 8: Define the term "EMI" as it is used in the banking and financial industry?
- Equated Mortgage Investment
- Equated Monthly Instalment (Correct answer)
- Equal Monthly Investment
- Easy Monthly Instalment
Correct answer: Equated Monthly Instalment
EMI stands for Equated Monthly Instalment, which is a fixed payment amount made by a borrower to a lender at a specified date each calendar month. It is used to pay off both interest and principal over a set period, commonly for home loans, car loans, and personal loans. This term is fundamental to retail banking and consumer finance.
Question 9: What determines the bank rate is the following?
- Securities and Exchange Board of India
- State Bank of India
- Government Of India
- Reserve Bank of India (Correct answer)
Correct answer: Reserve Bank of India
The bank rate is the rate at which the central bank (in India, the Reserve Bank of India or RBI) lends money to commercial banks without any collateral. The RBI uses the bank rate as a monetary policy tool to control credit availability and inflation in the economy. Therefore, it is solely determined by the Reserve Bank of India.
Question 10: Which of the following loan types are teaser rates associated to?
- Reverse mortgage loans
- Auto loans
- Personal loans
- Home loans (Correct answer)
Correct answer: Home loans
Teaser rates are typically associated with home loans, where a bank offers a lower interest rate for an initial period (e.g., 1-3 years) before switching to a higher, variable rate for the remainder of the loan term. This strategy aims to attract borrowers with seemingly affordable initial payments. While other loans might have introductory offers, 'teaser rates' are most famously linked to the housing market.
Question 11: What does the M in the M-Banking Service that banks provide to their clients stand for?
- Money
- Message
- Marginal
- Mobile Phone (Correct answer)
Correct answer: Mobile Phone
M-Banking stands for Mobile Banking, which refers to the service provided by banks that allows customers to perform financial transactions using their mobile phones. This includes checking account balances, transferring funds, paying bills, and other banking activities, making banking accessible anytime, anywhere. The 'M' specifically denotes the mobile device used for these services.
Question 12: Which of the following cities houses the Reserve Bank of India's headquarters?
- Kolkata
- Dehradun
- New Delhi
- Mumbai (Correct answer)
Correct answer: Mumbai
The Reserve Bank of India (RBI), the central bank of India, has its headquarters located in Mumbai, Maharashtra. This is where the Governor and Deputy Governors operate from, and where major policy decisions are formulated and announced. Mumbai is also India's financial capital, making it a strategic location for the central bank.
Question 13: What year did the State Bank of India rebrand the Imperial Bank of India?
- Momentary reserves
- Excess reserves (Correct answer)
- Deposit reserves
- Cash reserves
Correct answer: Excess reserves
Assuming the question intended to ask about types of bank reserves, excess reserves are funds held by a bank in its reserve account at the central bank that are over and above the legally required minimum reserve amount. Banks can use these excess reserves to make new loans, invest, or meet unexpected withdrawals, playing a role in liquidity management.
Question 14: What year did the State Bank of India rebrand the Imperial Bank of India?
- 1962
- 1957
- 1965
- 1955 (Correct answer)
Correct answer: 1955
The Imperial Bank of India was nationalized and rebranded as the State Bank of India (SBI) in the year 1955. This transformation was a significant event in India's banking history, aimed at expanding banking services to rural areas and supporting economic development. The State Bank of India Act was passed in 1955 to facilitate this change.
Question 15: The sponsors of Regional Rural Banks are
- State Bank of India
- Government of India
- Reserve Bank of India
- Nationalised Commercial Bank (Correct answer)
Correct answer: Nationalised Commercial Bank
Regional Rural Banks (RRBs) in India are sponsored by a Nationalised Commercial Bank, the Government of India, and the respective State Government. The sponsoring commercial bank typically holds 35% of the equity, provides managerial assistance, and helps in the training of personnel. This structure ensures support and oversight for the RRBs, which primarily serve rural and agricultural sectors.
Question 16: Which ministry established the National Corporate Social Responsibility Awards (NCSRA)?
- Ministry of Minority Affairs
- Ministry of Commerce & Industry
- Ministry of Corporate Affairs (Correct answer)
- Ministry of Human Resource and Development
Correct answer: Ministry of Corporate Affairs
The National Corporate Social Responsibility Awards (NCSRA) were established by the Ministry of Corporate Affairs (MCA) in India. These awards recognize companies that have made significant contributions to society through their CSR initiatives. The MCA is responsible for regulating corporate governance and promoting responsible business practices in the country.
Free Banking Exam Question and Answers
Which public sector bank among the following has the most locations abroad?