MCQ on Indian Financial System
Q1. Which of the following institutions is responsible for regulating the Indian financial system?
a) Reserve Bank of India (RBI)
b) Securities and Exchange Board of India (SEBI)
c) Insurance Regulatory and Development Authority of India (IRDAI)
d) Pension Fund Regulatory and Development Authority (PFRDA)
Show Answer
Correct Answer: a) Reserve Bank of India (RBI)
Explanation: The Reserve Bank of India (RBI) is the central banking institution of India and the primary regulator of the Indian financial system. It is responsible for formulating and implementing monetary policy, managing foreign exchange reserves, and ensuring the stability of the financial system.
Q2. Which of the following is a primary objective of the New Economic Policy in India?
a) Promoting exports
b) Reducing trade deficit
c) Encouraging import substitution
d) All of the above
Show Answer
Correct Answer: d) All of the above
Explanation: The primary objectives of the New Economic Policy in India include promoting exports, reducing trade deficit, and encouraging import substitution. The policy aimed to boost the country’s foreign exchange earnings, promote economic growth, and enhance self-reliance.
Q3. Which of the following is a major component of the Indian financial system?
a) Money market
b) Capital market
c) Insurance market
d) All of the above
Show Answer
Correct Answer: d) All of the above
Explanation: The Indian financial system comprises various components, including the money market, capital market, and insurance market. These markets facilitate the mobilization of funds, allocation of resources, and risk management in the economy.
Q4. Which of the following is a primary objective of financial inclusion in India?
a) Providing access to financial services to the unbanked population
b) Promoting savings and investment
c) Reducing income inequality
d) All of the above
Show Answer
Correct Answer: d) All of the above
Explanation: Financial inclusion aims to provide access to financial services to the unbanked population, promote savings and investment, and reduce income inequality. It seeks to ensure that all individuals, particularly those from economically disadvantaged backgrounds, have access to affordable and appropriate financial products and services.
Q5. Which of the following is a major government initiative aimed at promoting financial inclusion in India?
a) Pradhan Mantri Jan Dhan Yojana (PMJDY)
b) Pradhan Mantri Mudra Yojana (PMMY)
c) Atal Pension Yojana (APY)
d) All of the above
Show Answer
Correct Answer: d) All of the above
Explanation: The Indian government has launched several initiatives to promote financial inclusion, including the Pradhan Mantri Jan Dhan Yojana (PMJDY), which aims to provide access to banking services to all households; the Pradhan Mantri Mudra Yojana (PMMY), which provides financial assistance to micro and small enterprises; and the Atal Pension Yojana (APY), which offers pension benefits to the unorganized sector.
Q6. Which of the following is a major challenge faced by the Indian economy in terms of financial inclusion?
a) High levels of financial literacy
b) Low levels of financial literacy
c) High levels of access to financial services
d) Low levels of access to financial services
Show Answer
Correct Answer: b) Low levels of financial literacy
Explanation: Low levels of financial literacy are a major challenge faced by the Indian economy in terms of financial inclusion. Limited awareness and understanding of financial products and services can hinder the ability of individuals, particularly those from economically disadvantaged backgrounds, to make informed financial decisions and access appropriate financial services.
Q7. Which of the following is a major government initiative aimed at promoting financial literacy in India?
a) National Strategy for Financial Education (NSFE)
b) Financial Literacy and Credit Counseling Centers (FLCCs)
c) Reserve Bank of India’s Project Financial Literacy
d) All of the above
Show Answer
Correct Answer: d) All of the above
Explanation: The Indian government and the Reserve Bank of India (RBI) have launched several initiatives to promote financial literacy, including the National Strategy for Financial Education (NSFE), which provides a framework for financial education efforts; the Financial Literacy and Credit Counseling Centers (FLCCs), which offer financial education and counseling services; and the RBI’s Project Financial Literacy, which aims to spread information about the central bank and general banking principles to various target groups.
Q8. Which of the following is a major challenge faced by the Indian economy in terms of access to credit?
a) High levels of access to formal credit
b) Low levels of access to formal credit
c) High levels of access to informal credit
d) Low levels of access to informal credit
Show Answer
Correct Answer: b) Low levels of access to formal credit
Explanation: Low levels of access to formal credit are a major challenge faced by the Indian economy. Many individuals, particularly those from economically disadvantaged backgrounds, lack access to formal credit sources, forcing them to rely on informal sources of credit, often at high interest rates.
Q9. Which of the following is a major government initiative aimed at increasing access to credit for the agriculture sector in India?
a) Kisan Credit Card (KCC) Scheme
b) Pradhan Mantri Fasal Bima Yojana (PMFBY)
c) National Agriculture Market (e-NAM)
d) Rashtriya Krishi Vikas Yojana (RKVY)
Show Answer
Correct Answer: a) Kisan Credit Card (KCC) Scheme
Explanation: The Kisan Credit Card (KCC) Scheme is a government initiative aimed at providing adequate and timely credit support from the banking system under a single window with flexible and simplified procedures to farmers of India. The scheme was introduced in August 1998 by Indian public sector banks.
Q10. Which of the following is a major government initiative aimed at increasing access to credit for micro, small, and medium enterprises (MSMEs) in India?
a) Pradhan Mantri Mudra Yojana (PMMY)
b) Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGS)
c) Stand-Up India Scheme
d) All of the above
Show Answer
Correct Answer: d) All of the above
Explanation: The Indian government has launched several initiatives to increase access to credit for micro, small, and medium enterprises (MSMEs), including the Pradhan Mantri Mudra Yojana (PMMY), which provides financial assistance to micro enterprises; the Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGS), which offers credit guarantee to financial institutions for loans extended to MSMEs; and the Stand-Up India Scheme, which facilitates bank loans for setting up new enterprises in the manufacturing, services, or trading sectors.
Q11. Which of the following is a major challenge faced by the Indian economy in terms of financial stability?
a) High levels of non-performing assets (NPAs)
b) Low levels of non-performing assets (NPAs)
c) High levels of public debt
d) Low levels of public debt
Show Answer
Correct Answer: a) High levels of non-performing assets (NPAs)
Explanation: High levels of non-performing assets (NPAs) in the banking sector are a major challenge faced by the Indian economy in terms of financial stability. High NPAs can affect the stability of the financial sector and hamper the flow of credit to the economy.
Q12. Which of the following is a major government initiative aimed at addressing the issue of non-performing assets (NPAs) in the Indian banking sector?
a) Insolvency and Bankruptcy Code (IBC)
b) Asset Reconstruction Companies (ARCs)
c) Strategic Debt Restructuring (SDR) Scheme
d) All of the above
Show Answer
Correct Answer: d) All of the above
Explanation: The Indian government has introduced several initiatives to address the issue of non-performing assets (NPAs) in the banking sector, including the Insolvency and Bankruptcy Code (IBC), which provides a framework for the resolution of corporate and individual insolvency; Asset Reconstruction Companies (ARCs), which acquire and manage NPAs; and the Strategic Debt Restructuring (SDR) Scheme, which allows banks to convert their debt into equity and take control of defaulting companies.
Q13. Which of the following is a major challenge faced by the Indian economy in terms of financial sector development?
a) High levels of financial inclusion
b) Low levels of financial inclusion
c) High levels of financial literacy
d) Low levels of financial literacy
Show Answer
Correct Answer: b) Low levels of financial inclusion
Explanation: Low levels of financial inclusion are a major challenge faced by the Indian economy in terms of financial sector development. Limited access to financial services, particularly for those from economically disadvantaged backgrounds, can hinder economic growth and contribute to income inequality.
Q14. Which of the following is a major government initiative aimed at promoting the development of the Indian bond market?
a) Corporate Bond Market Development Programme
b) Electronic Book Provider (EBP) Platform
c) Partial Credit Guarantee Scheme (PCGS)
d) All of the above
Show Answer
Correct Answer: d) All of the above
Explanation: The Indian government has introduced several initiatives to promote the development of the Indian bond market, including the Corporate Bond Market Development Programme, which aims to deepen the corporate bond market; the Electronic Book Provider (EBP) Platform, which facilitates the issuance of debt securities in the primary market; and the Partial Credit Guarantee Scheme (PCGS), which provides credit enhancement to lower-rated corporate bonds.
Q15. Which of the following is a major challenge faced by the Indian economy in terms of the development of the corporate bond market?
a) High levels of market liquidity
b) Low levels of market liquidity
c) High levels of market transparency
d) Low levels of market transparency
Show Answer
Correct Answer: b) Low levels of market liquidity
Explanation: Low levels of market liquidity are a major challenge faced by the Indian economy in terms of the development of the corporate bond market. Limited liquidity can hinder the efficient functioning of the market, increase transaction costs, and discourage investor participation.
Q16. Which of the following is a major government initiative aimed at promoting the development of the Indian insurance market?
a) Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)
b) Pradhan Mantri Suraksha Bima Yojana (PMSBY)
c) Atal Pension Yojana (APY)
d) All of the above
Show Answer
Correct Answer: d) All of the above
Explanation: The Indian government has introduced several initiatives to promote the development of the Indian insurance market, including the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), which provides life insurance coverage; the Pradhan Mantri Suraksha Bima Yojana (PMSBY), which offers accident insurance coverage; and the Atal Pension Yojana (APY), which provides pension benefits to the unorganized sector.
Q17. Which of the following is a major challenge faced by the Indian economy in terms of the development of the insurance market?
a) High levels of insurance penetration
b) Low levels of insurance penetration
c) High levels of insurance awareness
d) Low levels of insurance awareness
Show Answer
Correct Answer: b) Low levels of insurance penetration
Explanation: Low levels of insurance penetration are a major challenge faced by the Indian economy in terms of the development of the insurance market. Limited access to insurance products, particularly for those from economically disadvantaged backgrounds, can hinder risk management and contribute to income inequality.
Q18. Which of the following is a major government initiative aimed at promoting the development of the Indian pension market?
a) National Pension System (NPS)
b) Atal Pension Yojana (APY)
c) Employees’ Provident Fund (EPF)
d) All of the above
Show Answer
Correct Answer: d) All of the above
Explanation: The Indian government has introduced several initiatives to promote the development of the Indian pension market, including the National Pension System (NPS), which is a voluntary, defined-contribution pension system; the Atal Pension Yojana (APY), which provides pension benefits to the unorganized sector; and the Employees’ Provident Fund (EPF), which is a mandatory savings and retirement scheme for salaried employees.
Q19. Which of the following is a major challenge faced by the Indian economy in terms of the development of the pension market?
a) High levels of pension coverage
b) Low levels of pension coverage
c) High levels of pension awareness
d) Low levels of pension awareness
Show Answer
Correct Answer: b) Low levels of pension coverage
Explanation: Low levels of pension coverage are a major challenge faced by the Indian economy in terms of the development of the pension market. Limited access to pension products, particularly for those from economically disadvantaged backgrounds and the unorganized sector, can hinder retirement planning and contribute to income inequality in old age.
Q20. Which of the following is a major government initiative aimed at promoting the development of the Indian mutual fund industry?
a) Systematic Investment Plan (SIP)
b) Mutual Fund Utility (MFU)
c) Securities and Exchange Board of India (SEBI) regulations
d) All of the above
Show Answer
Correct Answer: d) All of the above
Explanation: The Indian government and the Securities and Exchange Board of India (SEBI) have introduced several initiatives to promote the development of the Indian mutual fund industry, including the Systematic Investment Plan (SIP), which allows investors to invest in mutual funds through regular, small investments; the Mutual Fund Utility (MFU), which is a shared services platform for the mutual fund industry; and SEBI regulations, which govern the functioning of mutual funds and protect the interests of investors.