Pariksha SaathiGeneral Awareness
Banking and Financial Awareness: Practice Questions with Answers
106 practice questions on Banking and Financial Awareness, with answers; most also have an explanation or a worked solution. Try each one before you open its answer.
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Q.51
What does KYC stand for in banking?
- A Know Your Customer
- B Keep Your Cash
- C Key Yield Certificate
- D Know Your Credit
Show answer
Correct answer: (A) Know Your Customer
KYC (Know Your Customer) is the process banks use to verify the identity of their customers.
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Q.52
What does RTGS stand for?
- A Real Time Gross Settlement
- B Rapid Transfer Gross System
- C Real Transaction Gross Settlement
- D Regional Time Gross Settlement
Show answer
Correct answer: (A) Real Time Gross Settlement
RTGS stands for Real Time Gross Settlement, used for high-value fund transfers that are settled individually and immediately.
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Q.53
In which year was the Atal Pension Yojana (APY), a government-backed pension scheme offering a fixed monthly pension of Rs 1,000 to Rs 5,000 after age 60, launched?
- A 2015
- B 2010
- C 2018
- D 2012
Show answer
Correct answer: (A) 2015
The Atal Pension Yojana was launched on 9 May 2015, aimed at providing social security to workers in the unorganised sector.
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Q.54
Before MCLR was introduced, what was the 'Base Rate' used by banks for?
- A The minimum rate below which a bank could not lend to any customer
- B The maximum interest a bank could pay on savings deposits
- C The rate at which the RBI lent to banks
- D The rate charged only on foreign currency loans
Show answer
Correct answer: (A) The minimum rate below which a bank could not lend to any customer
The Base Rate, used before the MCLR system, was the minimum interest rate below which a bank was not permitted to lend, except in a few specific cases allowed by the RBI.
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Q.55
What is 'Reverse Repo Rate'?
- A The rate at which RBI borrows money from commercial banks
- B The rate at which RBI lends to commercial banks
- C The rate banks charge on personal loans
- D The rate of interest on fixed deposits
Show answer
Correct answer: (A) The rate at which RBI borrows money from commercial banks
Reverse Repo Rate is the rate at which the RBI borrows funds from commercial banks, used to absorb excess liquidity.
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Q.56
What does IFSC (used to identify a bank branch) stand for?
- A Indian Financial System Code
- B Indian Fiscal System Code
- C International Financial System Code
- D Indian Financial Security Code
Show answer
Correct answer: (A) Indian Financial System Code
IFSC stands for Indian Financial System Code - an 11-character code that uniquely identifies a bank branch for electronic fund transfers.
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Q.57
What are 'Open Market Operations' (OMO) conducted by the RBI?
- A The buying and selling of government securities in the open market to regulate money supply and liquidity
- B Direct lending by RBI to individual retail customers
- C The auctioning of new bank licences
- D RBI's trading of foreign company shares
Show answer
Correct answer: (A) The buying and selling of government securities in the open market to regulate money supply and liquidity
Open Market Operations involve RBI buying or selling government securities to inject or absorb liquidity from the banking system.
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Q.58
In which year did SEBI become a statutory body under the SEBI Act?
- A 1992
- B 1988
- C 1999
- D 1935
Show answer
Correct answer: (A) 1992
SEBI was first set up as a non-statutory body in 1988 and became a statutory body in 1992 when the SEBI Act came into force.
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Q.59
What is a key restriction on Payments Banks compared to full-service commercial banks?
- A They cannot issue loans or credit cards
- B They cannot accept any deposits at all
- C They can only operate in one city
- D They are not allowed to offer savings accounts
Show answer
Correct answer: (A) They cannot issue loans or credit cards
Payments Banks can accept deposits (up to a regulatory limit) and offer payment/remittance services, but are not permitted to issue loans or credit cards.
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Q.60
What is the key structural difference between NEFT and RTGS settlement?
- A NEFT settles transfers in batches; RTGS settles each transaction individually and immediately
- B NEFT is only for government use; RTGS is only for individuals
- C NEFT works only on weekends; RTGS works only on weekdays
- D There is no real difference between them
Show answer
Correct answer: (A) NEFT settles transfers in batches; RTGS settles each transaction individually and immediately
NEFT processes transactions in batches at fixed intervals, while RTGS settles each transaction individually on a real-time, one-to-one basis.
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Q.61
What does PAN stand for, in the context of a PAN card?
- A Permanent Account Number
- B Personal Account Number
- C Public Account Number
- D Primary Account Number
Show answer
Correct answer: (A) Permanent Account Number
PAN stands for Permanent Account Number, a unique identifier issued by the Income Tax Department for financial transactions.
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Q.62
Basel norms, followed internationally by banks, primarily deal with what?
- A Capital adequacy and risk management standards for banks
- B Rules for printing currency notes
- C International postal regulations
- D Import-export tariffs
Show answer
Correct answer: (A) Capital adequacy and risk management standards for banks
Basel norms are international banking regulations focused on capital adequacy, stress testing, and risk management to strengthen bank stability.
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Q.63
A Non-Banking Financial Company (NBFC) differs from a bank mainly because it cannot do what?
- A Accept demand deposits (such as savings or current account deposits) or issue its own cheques
- B Provide any form of loans to customers
- C Operate in more than one state
- D Be regulated by the RBI
Show answer
Correct answer: (A) Accept demand deposits (such as savings or current account deposits) or issue its own cheques
NBFCs provide many bank-like financial services but, unlike banks, cannot accept demand deposits or issue cheques drawn on themselves.
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Q.64
Which organization acts as the apex regulatory body for stock markets in India?
- A SEBI (Securities and Exchange Board of India)
- B DICGC (Deposit Insurance and Credit Guarantee Corporation)
- C NABARD (National Bank for Agriculture and Rural Development)
- D IRDAI (Insurance Regulatory and Development Authority of India)
Show answer
Correct answer: (A) SEBI (Securities and Exchange Board of India)
SEBI (Securities and Exchange Board of India) is the apex body for stock markets in India.
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Q.65
An FCNR (Foreign Currency Non-Resident) account is a term deposit held in which form?
- A Foreign currency
- B Indian Rupees
- C Gold
- D Government bonds
Show answer
Correct answer: (A) Foreign currency
An FCNR account is a term deposit held directly in a foreign currency, so it carries no rupee exchange-rate risk.
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Q.66
A savings account is primarily designed for what purpose?
- A Individuals to save money while earning interest, with some transaction limits
- B Businesses to conduct unlimited daily transactions with no interest
- C Only for receiving a government pension
- D Only for holding foreign currency
Show answer
Correct answer: (A) Individuals to save money while earning interest, with some transaction limits
A savings account encourages individuals to save money and earns interest, though it typically has limits on the number of free transactions.
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Q.67
What does 'Priority Sector Lending' (PSL) require Indian banks to do?
- A Direct a specified portion of their lending to sectors like agriculture, MSMEs, education and housing
- B Give priority to their largest corporate borrowers
- C Lend only to government-owned companies
- D Prioritise foreign currency loans over rupee loans
Show answer
Correct answer: (A) Direct a specified portion of their lending to sectors like agriculture, MSMEs, education and housing
PSL norms require banks to direct a specified share of their lending to priority sectors such as agriculture, MSMEs, education and housing.
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Q.68
Which organization acts as the apex regulatory body for pension funds in India?
- A SEBI (Securities and Exchange Board of India)
- B EXIM Bank (Export-Import Bank of India)
- C SIDBI (Small Industries Development Bank of India)
- D PFRDA (Pension Fund Regulatory and Development Authority)
Show answer
Correct answer: (D) PFRDA (Pension Fund Regulatory and Development Authority)
PFRDA (Pension Fund Regulatory and Development Authority) is the apex body for pension funds in India.
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Q.69
What does CBS, the technology that lets a bank customer operate their account from any branch or channel, stand for?
- A Core Banking Solution
- B Central Bank System
- C Customer Banking Service
- D Combined Banking Software
Show answer
Correct answer: (A) Core Banking Solution
CBS stands for Core Banking Solution - a networked system that lets a bank's branches share a common, centralised database, so a customer can transact from any branch.
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Q.70
What does SEBI stand for?
- A Securities and Exchange Board of India
- B State Exchange Board of India
- C Securities and Economic Board of India
- D Stock Exchange Bureau of India
Show answer
Correct answer: (A) Securities and Exchange Board of India
SEBI stands for Securities and Exchange Board of India, the regulatory body for the securities and capital markets.
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Q.71
What is a 'Bank Guarantee'?
- A A bank's promise to cover a loss if a client fails to fulfil a contractual obligation
- B A fixed deposit that cannot be withdrawn early
- C A guarantee that a loan application will be approved
- D A government scheme insuring all bank deposits
Show answer
Correct answer: (A) A bank's promise to cover a loss if a client fails to fulfil a contractual obligation
A Bank Guarantee is a commitment by a bank to pay a specified amount if its client fails to meet a contractual or financial obligation.
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Q.72
What does SLR stand for in banking?
- A Statutory Liquidity Ratio
- B Standard Lending Rate
- C Savings and Loan Ratio
- D State Liquidity Reserve
Show answer
Correct answer: (A) Statutory Liquidity Ratio
SLR (Statutory Liquidity Ratio) is the minimum percentage of deposits a bank must maintain in the form of liquid assets like cash, gold, or government securities.
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Q.73
What is a 'stale cheque'?
- A A cheque presented for payment after its validity period has expired
- B A cheque with a future date written on it
- C A cheque that has been crossed with two parallel lines
- D A cheque payable to the bearer
Show answer
Correct answer: (A) A cheque presented for payment after its validity period has expired
A stale cheque is one presented after its validity period (commonly three months from the date of issue in India) has lapsed, making it invalid for payment.
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Q.74
What is the current deposit insurance cover provided by DICGC per depositor per bank in India?
- A Rs 5 lakh
- B Rs 1 lakh
- C Rs 10 lakh
- D Rs 2 lakh
Show answer
Correct answer: (A) Rs 5 lakh
DICGC insures each depositor's funds in a bank up to Rs 5 lakh (principal + interest combined), a limit set in the 2020 budget and effective from February 2020.
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Q.75
What does UPI stand for?
- A Unified Payments Interface
- B United Payments Interface
- C Universal Payment Instrument
- D Unified Payment Instrument
Show answer
Correct answer: (A) Unified Payments Interface
UPI stands for Unified Payments Interface, a system that lets users link multiple bank accounts to a single mobile application for instant transfers.
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Q.76
Which type of bank account is designed for regular monthly savings through fixed instalments over a set period?
- A Recurring Deposit account
- B Current account
- C Savings account
- D Demat account
Show answer
Correct answer: (A) Recurring Deposit account
A Recurring Deposit (RD) account allows a depositor to invest a fixed amount every month for a set tenure, earning interest on the accumulated sum.
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Q.77
What does IFSC code identify in Indian banking?
- A A specific bank branch
- B A customer's account type
- C A loan category
- D A currency exchange rate
Show answer
Correct answer: (A) A specific bank branch
IFSC (Indian Financial System Code) is an 11-character alphanumeric code - the first 4 letters identify the bank, the 5th character is 0 and the last 6 characters identify the branch - that uniquely identifies a bank branch for electronic fund transfers.
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Q.78
Which government insurance scheme provides coverage of up to Rs 2 lakh for accidental death or disability, available to account holders aged 18 to 70?
- A Pradhan Mantri Suraksha Bima Yojana (PMSBY)
- B Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)
- C Atal Pension Yojana (APY)
- D Ayushman Bharat
Show answer
Correct answer: (A) Pradhan Mantri Suraksha Bima Yojana (PMSBY)
PMSBY is an accident insurance scheme offering up to Rs 2 lakh coverage for accidental death or disability, available to savings account holders aged 18 to 70.
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Q.79
Which RBI mechanism allows bank customers to get their complaints against a bank resolved without approaching a court?
- A Reserve Bank - Integrated Ombudsman Scheme (RB-IOS)
- B Lok Adalat
- C Consumer Protection Council
- D Banking Codes and Standards Board
Show answer
Correct answer: (A) Reserve Bank - Integrated Ombudsman Scheme (RB-IOS)
The Reserve Bank - Integrated Ombudsman Scheme, 2021 (RB-IOS), launched on 12 November 2021, is RBI's mechanism for the quick and cost-free resolution of customer complaints against banks and other RBI-regulated entities; it integrated the earlier Banking Ombudsman Scheme (2006), the Ombudsman Scheme for NBFCs (2018) and the Ombudsman Scheme for Digital Transactions (2019).
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Q.80
Which type of bank account is most suitable for frequent business transactions without interest earnings?
- A Current account
- B Savings account
- C Fixed deposit account
- D Recurring deposit account
Show answer
Correct answer: (A) Current account
A current account is designed for frequent transactions, typically used by businesses, and does not usually earn interest.
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Q.81
What is a 'Small Finance Bank' primarily licensed to do?
- A Provide basic banking and credit services to underserved sections such as small farmers and micro/small enterprises
- B Operate exclusively in foreign exchange trading
- C Handle only government treasury operations
- D Provide wholesale banking to large corporations only
Show answer
Correct answer: (A) Provide basic banking and credit services to underserved sections such as small farmers and micro/small enterprises
Small Finance Banks are licensed to extend basic banking and credit services to underserved sections like small farmers and micro/small enterprises.
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Q.82
What does SARFAESI, the 2002 Act empowering banks to recover bad loans without court intervention, stand for?
- A Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest
- B Secure Asset Recovery and Financial Enforcement of Security Interest
- C Securitisation and Recovery of Financial Assets and Enforcement of Security Interest
- D Security and Reconstruction of Financial Assets and Enforcement of Securities Interest
Show answer
Correct answer: (A) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest
SARFAESI stands for Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest, enacted in 2002.
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Q.83
A current account is typically used by whom, and does it usually earn interest?
- A Businesses, for frequent transactions; it typically does not earn interest
- B Only students; it earns high interest
- C Only senior citizens; it earns high interest
- D Only the government; interest rates vary daily
Show answer
Correct answer: (A) Businesses, for frequent transactions; it typically does not earn interest
A current account is designed for businesses needing frequent, often high-volume transactions, and typically does not pay interest on the balance.
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Q.84
A Fixed Deposit (FD) involves what?
- A Depositing a lump sum for a fixed tenure at a fixed interest rate
- B Depositing small amounts every month for a fixed tenure
- C Withdrawing money without any tenure restriction
- D A loan given by the bank to the customer
Show answer
Correct answer: (A) Depositing a lump sum for a fixed tenure at a fixed interest rate
A Fixed Deposit is a lump-sum deposit locked in for a fixed period at a predetermined, fixed interest rate.
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Q.85
What is the primary goal of PMJDY?
- A Financial inclusion - providing banking access to the unbanked
- B Providing free mobile phones to farmers
- C Building highways across rural India
- D Providing free higher education
Show answer
Correct answer: (A) Financial inclusion - providing banking access to the unbanked
PMJDY's primary goal is financial inclusion: ensuring every household has access to basic banking, savings, credit, insurance, and pension services.
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Q.86
Who was the first Governor of the Reserve Bank of India?
- A Sir Osborne Smith
- B C.D. Deshmukh
- C Benegal Rama Rau
- D James Braid Taylor
Show answer
Correct answer: (A) Sir Osborne Smith
Sir Osborne Smith served as the first Governor of the RBI, from 1 April 1935 to 30 June 1937.
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Q.87
What does PAN (issued to taxpayers) stand for?
- A Permanent Account Number
- B Personal Account Number
- C Public Account Number
- D Payment Account Number
Show answer
Correct answer: (A) Permanent Account Number
PAN stands for Permanent Account Number, a unique ten-character identifier issued by the Income Tax Department.
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Q.88
What does NEFT stand for?
- A National Electronic Funds Transfer
- B National Electronic Financial Transaction
- C New Electronic Funds Transfer
- D National Efficient Funds Transfer
Show answer
Correct answer: (A) National Electronic Funds Transfer
NEFT stands for National Electronic Funds Transfer, a system for transferring funds electronically between bank accounts.
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Q.89
SEBI primarily regulates which sector?
- A The securities and stock market
- B Agricultural produce pricing
- C Telecommunications
- D Road transport
Show answer
Correct answer: (A) The securities and stock market
SEBI regulates the securities market in India, protecting investors and promoting fair, transparent trading practices.
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Q.90
What is the Marginal Standing Facility (MSF)?
- A A facility allowing banks to borrow overnight funds from RBI against government securities, usually at a rate higher than the repo rate
- B A facility allowing RBI to borrow funds from commercial banks overnight
- C A scheme for marginal farmers to get subsidised loans
- D A facility allowing banks to deposit excess funds with RBI
Show answer
Correct answer: (A) A facility allowing banks to borrow overnight funds from RBI against government securities, usually at a rate higher than the repo rate
MSF lets banks borrow overnight funds from RBI against government securities, typically at a rate above the repo rate, to meet urgent liquidity needs.
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Q.91
What does NACH, the bulk electronic clearing system used for salaries, EMIs and subsidies, stand for?
- A National Automated Clearing House
- B National Account Clearing Hub
- C National Automated Credit House
- D New Automated Clearing House
Show answer
Correct answer: (A) National Automated Clearing House
NACH stands for National Automated Clearing House, used for high-volume repetitive payments like salaries, EMIs and subsidies.
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Q.92
Which organization acts as the apex regulatory body for digital payments in India?
- A SIDBI (Small Industries Development Bank of India)
- B RBI (Reserve Bank of India)
- C NPCI (National Payments Corporation of India)
- D DICGC (Deposit Insurance and Credit Guarantee Corporation)
Show answer
Correct answer: (C) NPCI (National Payments Corporation of India)
NPCI (National Payments Corporation of India) is the apex body for digital payments in India.
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Q.93
What is 'Repo Rate'?
- A The rate at which RBI lends short-term funds to commercial banks
- B The rate at which commercial banks lend to each other
- C The interest rate on savings accounts
- D The rate at which banks lend to the government
Show answer
Correct answer: (A) The rate at which RBI lends short-term funds to commercial banks
Repo Rate is the rate at which the Reserve Bank of India lends money to commercial banks against government securities.
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Q.94
A 'demand draft' (DD) differs from a personal cheque mainly because it is what?
- A Prepaid and its payment is guaranteed by the issuing bank
- B Only valid for one hour after issue
- C Only usable for international transfers
- D Never linked to any bank account
Show answer
Correct answer: (A) Prepaid and its payment is guaranteed by the issuing bank
A demand draft is prepaid at the time of issue, so unlike a personal cheque, the bank guarantees its payment and it cannot bounce for insufficient funds.
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Q.95
What does IRDAI stand for?
- A Insurance Regulatory and Development Authority of India
- B Indian Rural Development Authority of India
- C Insurance Reserve and Deposit Authority of India
- D Indian Regulatory Development Authority of India
Show answer
Correct answer: (A) Insurance Regulatory and Development Authority of India
IRDAI stands for Insurance Regulatory and Development Authority of India - the body that regulates and promotes the insurance industry.
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Q.96
What does NABARD stand for?
- A National Bank for Agriculture and Rural Development
- B National Bureau for Agricultural Research and Development
- C National Bank for Agricultural Reserves and Deposits
- D National Board for Agriculture and Rural Development
Show answer
Correct answer: (A) National Bank for Agriculture and Rural Development
NABARD stands for National Bank for Agriculture and Rural Development, an apex institution supporting agricultural and rural credit in India.
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Q.97
What does LAF, the RBI facility that includes the repo and reverse repo rates, stand for?
- A Liquidity Adjustment Facility
- B Loan Advance Facility
- C Liquid Asset Fund
- D Long-term Adjustment Facility
Show answer
Correct answer: (A) Liquidity Adjustment Facility
LAF stands for Liquidity Adjustment Facility, the RBI mechanism (via repo and reverse repo operations) used to manage short-term liquidity in the banking system.
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Q.98
What does CASA, as in 'CASA ratio', stand for in banking?
- A Current Account Savings Account
- B Capital Account Savings Account
- C Current Asset Savings Account
- D Cash Account Savings Account
Show answer
Correct answer: (A) Current Account Savings Account
CASA stands for Current Account Savings Account; the CASA ratio measures the share of a bank's deposits held in these low-cost accounts.
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Q.99
What does KYC stand for?
- A Know Your Customer
- B Keep Your Cash
- C Know Your Credit
- D Keep Your Customer
Show answer
Correct answer: (A) Know Your Customer
KYC stands for Know Your Customer - the process banks use to verify customer identity before opening an account.
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Q.100
The State Bank of India was formed in 1955 by converting which earlier bank?
- A Imperial Bank of India
- B Bank of Bengal
- C Bank of Hindustan
- D Punjab National Bank
Show answer
Correct answer: (A) Imperial Bank of India
The Imperial Bank of India, formed in 1921 by merging three presidency banks, became the State Bank of India in 1955.
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How these questions were made
Authored by an AI assistant (Claude) - not reviewed by a subject-matter expert.
Generated by an AI assistant (Claude) from curated, well-established, textbook-standard banking/computer facts (not freely authored prose, and not time-sensitive) - the underlying facts are standard/stable (unit conversions, classic device categories, apex-body assignments) but the list itself is not reviewed by a subject-matter expert.