CAIIB BRBL Module A UNIT 3 MCQ – Regulation of Banking Business

Correct Answer: C. Banking Regulation Act. The Banking Regulation Act is the legislation specifically designed to govern and regulate the business activities of banking companies in India.

Correct Answer: B. The power to issue directives on loan and deposit terms. The Act empowers the RBI to issue binding instructions regarding the conditions and rates applicable to loans and deposits.

Correct Answer: C. Directors of the bank and related entities. The Act includes provisions that restrict banks from granting loans and advances to their own directors and certain parties connected with them.

Correct Answer: C. A reserve fund. The Banking Regulation Act mandates that banking companies must maintain a reserve fund and transfer a portion of their annual profits to it.

Correct Answer: B. Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). Banks are required to maintain the Cash Reserve Ratio and the Statutory Liquidity Ratio as well as hold a minimum percentage of assets in India.

Correct Answer: B. Sections 21 and 35A. Sections 21 and 35A of the Banking Regulation Act are the primary provisions that authorise the RBI to issue directives to banking companies.

Correct Answer: B. Statutory and binding. Directions issued by the RBI under these sections are statutory and legally binding on the banks they are addressed to.

Correct Answer: B. Bank advances (loans). Section 21 of the Act is specifically focused on regulating the loans and advances made by banks.

Correct Answer: C. Section 35A. Section 35A of the Banking Regulation Act grants the RBI broad powers to issue directions in the interest of banking policy, depositors, or the public interest.

Correct Answer: B. Bad loan resolutions. The 2017 amendment introduced these sections to give the RBI more power to facilitate the resolution of stressed assets or bad loans.

Correct Answer: A. Yes, they are binding by their nature. Statutory directions, once issued by the empowered authority, are binding regardless of whether they explicitly cite the specific section under which they are issued.

Correct Answer: C. Banking companies. RBI directives under the Banking Regulation Act are typically addressed to and intended for compliance by banking companies.

Correct Answer: B. Prosecution. Violation of binding directions issued by the RBI can lead to legal consequences, including prosecution.

Correct Answer: C. Generally prospective. Directions issued by regulatory bodies like the RBI are typically intended to apply to future actions and not retrospectively to past events.

Correct Answer: B. With bona fide intentions. The RBI, like other regulatory authorities, is expected to exercise its statutory powers genuinely and in good faith for the intended public purpose.

Correct Answer: C. Caution or advise banks and prohibit specific transactions. Section 36 allows the RBI to offer caution or advice to banks and also to prohibit them from engaging in certain types of transactions.

Correct Answer: B. Accepting deposits. Section 5(b) defines “banking” primarily as the acceptance of deposits of money from the public for the purpose of lending or investment.

Correct Answer: C. Section 5(b). Section 5(b) of the Banking Regulation Act provides the legal definition of “banking.”

Correct Answer: C. Time deposits. Fixed deposits and recurring deposits, which are repayable after a specific duration, fall under the category of time deposits.

Correct Answer: C. Demand deposits. Current accounts and savings accounts are examples of demand deposits, which customers can withdraw from on demand.

Correct Answer: C. The Reserve Bank of India (RBI). While banks have some flexibility, the RBI has the authority to issue directives regarding deposit terms and interest rates in the public interest.

Correct Answer: C. Section 35A(c). This specific clause within Section 35A grants the RBI the power to regulate deposit acceptance for stated reasons like public interest or depositor protection.

Correct Answer: C. ₹5 Lacs. The DICGC Amendment Act, 2021, provides for the return of insured deposits up to ₹5 Lacs within 90 days in case of a bank being placed under a moratorium.

Correct Answer: C. Unclaimed deposits. Section 26 of the Banking Regulation Act mandates banks to submit annual returns regarding deposits that have remained inactive and unclaimed for a specified period.

Correct Answer: B. 30 days. The annual return on unclaimed deposits must be filed with the RBI within thirty days after the close of each calendar year.

Correct Answer: C. 10 years. Accounts that have not seen any operation for a period of ten years are considered for reporting as unclaimed deposits.

Correct Answer: B. To take over funds from inoperative accounts and use them for depositor education and awareness. The DEAF receives funds from accounts that have been inoperative for 10 years or more, and these funds are used for promoting depositors’ interests.

Correct Answer: B. Yes, depositors can reclaim the funds from the DEAF. The system allows original depositors or their legal heirs to claim funds that have been transferred to the DEAF.

Correct Answer: C. Savings, fixed, current, and loan account balances, etc. The DEAF receives various types of eligible balances from accounts that meet the criteria for being inoperative.

Correct Answer: B. They are converted to rupees before transfer to DEAF. Foreign currency deposits that meet the criteria for transfer to DEAF are converted into Indian rupees.

Correct Answer: B. 3 percent per annum. The RBI currently sets the interest rate payable on unclaimed deposits transferred to the DEAF at 3% per annum.

Correct Answer: C. The facility to nominate a person to receive the deposit amount upon death. Section 45ZA allows depositors to make a nomination for the repayment of the deposit amount after their demise.

Correct Answer: B. Yes, a nomination can be varied or cancelled by the depositor. The Act provides for the flexibility to change or revoke a nomination made by the depositor.

Correct Answer: B. Any adult person appointed by the depositor. If the nominee is a minor, the depositor can appoint another person who is an adult to receive the deposit during the minority of the nominee.

Correct Answer: A. The bank’s liability is fully discharged. Payment made by the bank to the nominee in accordance with the nomination rules discharges the bank from its liability in respect of the deposit.

Correct Answer: B. No, the nominee receives the amount as a trustee for the legal heirs, and their claims are not affected. The nomination facilitates payment by the bank but does not determine the final ownership of the funds among the legal heirs.

Correct Answer: C. To protect the deceased’s estate and facilitate payment until legal representatives take action. Nomination is intended to simplify the process for the bank to release funds upon the depositor’s death, pending the settlement of the deceased’s estate among legal heirs.

Correct Answer: A. Safe custody articles and safe deposit lockers. The Banking Regulation Act also provides for nomination facilities concerning articles placed in safe custody with the bank and contents of safe deposit lockers hired from the bank.

Correct Answer: B. Access is granted as per the survivorship mandate. If a survivorship clause exists in the locker agreement, access is granted to the surviving joint hirers according to the terms of that mandate.

Correct Answer: B. Inform the nominees/survivors that access is as a trustee for the legal heirs. Banks must make it clear that while access is granted, the person receiving the articles or locker contents does so in trust for the ultimate legal heirs of the deceased.

Correct Answer: B. Lending money (loans and advances). Section 5(b) defines banking as accepting deposits for the purpose of lending or investment, making lending a core banking function.

Correct Answer: B. Loans and advances. Section 21 specifically deals with the RBI’s power to regulate and control the advances made by banking companies.

Correct Answer: B. In the public interest, for depositor interests, or banking policy. The RBI exercises its power under Section 21 based on considerations of public interest, the interests of depositors, or for the purpose of banking policy.

Correct Answer: C. Loan purposes, margin requirements, and maximum loan amounts. RBI directives can cover various aspects like the purposes for which loans can be given, the required margin, and limits on the quantum of loans.

Correct Answer: B. To prevent speculative hoarding of essential commodities. SCC is a tool used by the RBI to control credit flow to specific sectors or for specific commodities, usually to curb speculation and inflation.

Correct Answer: B. Essential commodities like food grains and pulses. SCC measures are often applied to credit against sensitive essential commodities prone to speculative hoarding.

Correct Answer: C. Directors of the banking company. Section 20 contains prohibitions and restrictions on banks granting loans and advances to their own directors and related parties.

Correct Answer: B. The bank’s own shares. Banks are specifically prohibited from granting loans or advances using their own shares as security.

Correct Answer: A. Partner, manager, employee, or guarantor. The restriction extends to firms where a director is involved in one of these capacities.

Correct Answer: B. Director, manager, employee, or guarantor. The prohibition applies to companies where a director has substantial interest or serves as director, manager, employee, or guarantor.

Correct Answer: C. The Reserve Bank of India. The Act stipulates that in such disputes, the decision of the RBI is final.

Correct Answer: B. Permission from the Reserve Bank of India. Section 20A requires banking companies to obtain prior permission from the RBI to remit any debt owed by a director.

Correct Answer: B. Partners or guarantors. The restriction on remitting debts extends to firms/companies with director interests and individuals for whom directors act as partners or guarantors.

Correct Answer: B. It is considered void. The Act explicitly states that any remission made without the required RBI permission is void.

Correct Answer: C. Sections 21 and 35A. These sections provide the RBI with the authority to regulate both the lending rates and deposit rates offered by banks.

Correct Answer: B. Any particular class of depositors, loanees, or banks. The principle is that the RBI’s regulations should not arbitrarily discriminate between different categories of customers or banks.

Correct Answer: B. Initially unregulated, then regulated from 1964 onwards. The regulation of deposit interest rates started in 1964 after an initial period where rates were not controlled.

Correct Answer: B. The liberalisation process. Economic liberalisation policies led to a move away from strict regulation of deposit interest rates, allowing banks more freedom.

Correct Answer: C. Large term deposits (₹2 crore and above). These banks have been permitted by the RBI to offer differential rates on bulk term deposits of ₹2 crore and above.

Correct Answer: B. Legal challenges to interest rates charged on loans. Section 21A of the Banking Regulation Act prevents courts from reopening loan transactions on the ground that the interest charged is excessive, effectively protecting banks from such legal challenges provided the rates are within RBI guidelines.

Correct Answer: B. Technology, security, legal, regulatory, and supervisory aspects. The RBI working group considered a broad range of issues including technological, security, legal, regulatory, and supervisory dimensions of internet banking.

Correct Answer: B. Internet banking and other electronic banking forms. The guidelines are intended to cover internet banking as well as other types of electronic banking channels.

Correct Answer: B. A security policy. RBI guidelines mandate that banks offering internet banking must have a comprehensive security policy approved by their Board of Directors.

Correct Answer: B. Security Officer, IT Division personnel, and Information Systems Auditor. Segregation of duties is recommended for roles such as the Security Officer, staff in the IT Division, and the Information Systems Auditor.

Correct Answer: C. Public Key Infrastructure (PKI). Public Key Infrastructure is mentioned as a preferred technology for ensuring secure access controls in internet banking.

Correct Answer: C. Penetration testing. Periodic penetration testing, involving both internal staff and external specialists, is required to assess the security of the internet banking system.

Correct Answer: B. Maintaining physical access controls. Banks are required to implement and maintain physical access controls to protect their internet banking infrastructure.

Correct Answer: B. Physical verification of the customer. For accounts opened online, the guidelines specify the need for physical verification of the customer.

Correct Answer: B. Consumer Protection Act, 1986. The Consumer Protection Act, 1986, is applicable to the services provided by banks to their customers.

Correct Answer: B. Unauthorized transfers and denial of services. Banks need to assess their liability concerning issues such as unauthorized fund transfers or denial of internet banking services.

Correct Answer: B. Yes, prior RBI approval is required. Banks must obtain prior approval from the RBI before they can offer internet banking services.

Correct Answer: B. Security breaches or failures. Banks are mandated to report any security breaches or failures related to their internet banking systems to the RBI.

Correct Answer: B. Yes, at the RBI’s discretion. The RBI has the authority to conduct special audits or inspections of a bank’s internet banking operations if it deems necessary.

Correct Answer: B. Members of the cheque clearing system. Access to inter-bank payment gateways for internet banking settlement is generally restricted to entities that are members of the cheque clearing system.

Correct Answer: B. Cross-border e-commerce payments. The description of inter-bank payment gateways in this context specifically excludes transactions like cross-border e-commerce.

Correct Answer: C. Leased line network with encryption. A secured leased line network with encryption is recommended for connectivity in inter-bank payment gateway systems.

Correct Answer: C. November 5, 2015. The RBI issued specific guidelines for cooperative banks regarding internet banking on November 5, 2015.

Correct Answer: B. Internet Banking (View Only). Cooperative banks offering only non-transactional services (like balance inquiry) via internet banking are required to report commencement to the RBI, not seek prior approval.

Correct Answer: C. ₹50 crore. Cooperative banks must have a minimum Net Worth of ₹50 crore to be eligible to offer internet banking services with transactional facilities.

Correct Answer: B. Gross NPAs < 7%, Net NPAs < 3%. The eligibility criteria include having Gross Non-Performing Assets below 7% and Net Non-Performing Assets below 3%.

Correct Answer: C. Net profit in the preceding year and at least 3 out of 4 previous years. The bank must have earned a net profit in the year immediately preceding the application and in at least three out of the four financial years before that.

Correct Answer: C. ≥ 10%. A minimum CRAR of 10% is one of the eligibility criteria for cooperative banks to offer transactional internet banking.

Correct Answer: C. Reserve Bank of India Act, 1934 (as amended). Specifically, Section 45W of the RBI Act, as amended in 2006, empowers the RBI to regulate money market instruments.

Correct Answer: C. Section 45W. Section 45W of the RBI Act grants the central bank powers related to regulating the financial system and interest rate products.

Correct Answer: B. Trade execution and settlement on recognized stock exchanges. The regulatory powers under Section 45W are specified as not applying to trade execution and settlement activities on recognised stock exchanges.

Correct Answer: B. Scheduled Commercial Banks. Scheduled Commercial Banks are listed as eligible participants in the Call, Notice, and Term Money Market.

Correct Answer: C. 100% of capital funds. The daily average borrowing limit for Call and Notice Money for SCBs is 100% of their capital funds in a reporting fortnight.

Correct Answer: C. 2.0% of aggregate deposits. The limit for cooperative banks’ borrowings in the money market is 2.0% of their aggregate deposits as at the end of the previous financial year.

Correct Answer: B. ₹5 lakh. Certificates of Deposit are issued in minimum denominations of ₹5 lakh.

Correct Answer: B. Minimum 7 days, Maximum 1 year. A CD can be issued for a minimum period of 7 days and a maximum period of up to 1 year.

Correct Answer: C. No, it is generally prohibited. The guidelines specify that no loans should be granted by banks against their own Certificates of Deposit, unless specifically permitted by the RBI.

Correct Answer: C. Dematerialized form. Commercial Paper is required to be issued in a dematerialized form.

Correct Answer: C. ₹5 lakh. Commercial Paper is issued in minimum denominations of ₹5 lakh.

Correct Answer: C. No, underwriting or co-acceptance is not permitted. The guidelines explicitly state that Commercial Paper cannot be underwritten or co-accepted.

Correct Answer: C. A3. Issuers above a certain issuance threshold are required to have a credit rating of at least A3 from a SEBI-registered credit rating agency.

Correct Answer: C. After 30 days. The buyback of Commercial Paper is permitted only after a period of 30 days from its date of issue.

Correct Answer: C. An independent and impartial authority for addressing public grievances against banks. The Banking Ombudsman is conceived as an independent authority providing an alternative mechanism for resolving customer complaints against banks.

Correct Answer: B. Alternative dispute resolution mechanism. The Banking Ombudsman Scheme is designed to offer customers a way to resolve their grievances with banks outside of the traditional court system.

Correct Answer: B. 1995. The first Banking Ombudsman Scheme was introduced in the year 1995.

Correct Answer: C. Banking, Non-Banking Financial Companies, and Digital Transactions. The 2021 scheme unified the three separate ombudsman schemes for banking, NBFCs, and digital transactions.

Correct Answer: C. ₹50 crore. Non-Scheduled Primary Co-operative Banks with deposits of ₹50 crore and above are brought under the purview of the Integrated Ombudsman Scheme.

Correct Answer: C. Jurisdiction neutral (“One Nation One Ombudsman”). The scheme operates on a principle where the customer does not need to identify the specific ombudsman office or scheme, offering a single point of contact.

Correct Answer: B. Deficiency in service. The scheme allows complaints based on allegations of ‘deficiency in service’ provided by the regulated entity.

Correct Answer: D. Chandigarh. The Centralised Receipt and Processing Centre for handling complaints under the scheme is located at RBI, Chandigarh.

Correct Answer: C. A Principal Nodal Officer of the rank of General Manager or equivalent. Regulated entities must appoint a Principal Nodal Officer, holding a rank not lower than a General Manager, to represent them.

Correct Answer: B. No, there is no appeal for regulated entities against awards for non-furnishing of information. The scheme specifies that regulated entities do not have the right to appeal against an award made by the Ombudsman solely based on their failure to provide requested information.

Correct Answer: B. Extends to the whole of India. The Integrated Ombudsman Scheme has applicability across the entire territory of India.

Correct Answer: B. RBI Act, Banking Regulation Act, Payment and Settlement Systems Act, and Credit Information Companies (Regulation) Act. The scheme covers entities regulated under these specific legislative frameworks.

Correct Answer: C. General Manager or equivalent. The appointed Principal Nodal Officer must hold a rank equivalent to or higher than a General Manager.

Correct Answer: B. The Ombudsman’s jurisdiction can be lost. Courts have held that if a matter is already being adjudicated by another legal forum, the Ombudsman’s jurisdiction over the same subject matter may cease.

Correct Answer: B. The Supreme Court. The Supreme Court has ruled that the Banking Ombudsman must comply with and not ignore the directions and circulars issued by the Reserve Bank of India.

Correct Answer: C. Recovery of debts due to banks and financial institutions. The DRT Act is primarily focused on facilitating the recovery of outstanding debts owed to banks and financial institutions.

Correct Answer: B. No, the Scheme cannot override the DRT Act. Despite its role in dispute resolution, the Banking Ombudsman Scheme does not have the legal authority to override the provisions of the DRT Act.

Correct Answer: B. Any discontinuity. The RBI’s definition highlights that financial stability means the financial sector can provide essential services to the economy without interruption.

Correct Answer: C. Dissipating financial imbalances that arise. The IMF definition includes the system’s ability to absorb and correct financial imbalances that emerge.

Correct Answer: B. Section 17(1). Section 17(1) of the Banking Regulation Act mandates the creation of a reserve fund by banking companies incorporated in India.

Correct Answer: C. 20%. As per Section 17(1), a minimum of 20% of the annual profits must be transferred to the reserve fund before dividend declaration.

Correct Answer: B. 25%. An RBI circular effective from March 31, 2001, increased the minimum transfer requirement to 25% of the net profits after tax.

Correct Answer: B. Staff bonus. The annual transfer to the reserve fund is made after adjusting for or providing for the staff bonus.

Correct Answer: B. If the bank has adequate paid-up capital and reserves. The RBI can recommend exemption for banks that already possess sufficient paid-up capital and reserves.

Correct Answer: B. If its reserve fund plus share premium account is equal to or greater than its paid-up capital. Exemption is possible if the sum of the reserve fund and share premium account is at least equal to the bank’s paid-up capital.

Correct Answer: B. The details of appropriation within 21 days. Any appropriation from these funds must be reported to the RBI within twenty-one days of such appropriation.

Correct Answer: B. No, Section 17(1) does not apply to foreign banks. Foreign banks are subject to different provisions, such as depositing a percentage of their profits with the RBI.

Correct Answer: B. Deposit 20% of annual profits with RBI. Foreign banks are required under Section 11(2) to deposit 20% of their annual profits in respect of their Indian business with the RBI.

Correct Answer: B. Second Schedule. Scheduled Banks are those specifically included in the Second Schedule of the RBI Act.

Correct Answer: B. Having a paid-up capital and reserves of at least ₹5 lakh. A key criterion for inclusion in the Second Schedule is possessing a paid-up capital and reserves amounting to not less than five lakh rupees.

Correct Answer: C. The depositors. The RBI must be satisfied that the bank’s conduct of affairs is not prejudicial to the interests of its depositors.

Correct Answer: B. A state co-operative bank, or a company, institution, or corporation. The bank must be either a state co-operative bank or incorporated as a company, institution, or corporation.

Correct Answer: C. An average daily balance based on a percentage of their demand and time liabilities in India. CRR is maintained as an average daily balance with the RBI, calculated as a percentage of the bank’s Net Demand and Time Liabilities (NDTL) in India.

Correct Answer: D. No, there is no statutory ceiling or floor rate. The statutory amendments removed the previously existing ceiling and floor rates for CRR, giving the RBI flexibility.

Correct Answer: C. Paid-up capital and reserves. A bank’s paid-up capital, reserves, and credit balance in profit and loss account are excluded from the Net Demand and Time Liabilities calculation for CRR.

Correct Answer: C. 90%. SCBs are required to maintain a minimum of 90% of their average daily CRR requirement on each day of the reporting fortnight.

Correct Answer: C. No, RBI cannot pay interest on CRR balances. The relevant section (Section 42(1B)) that allowed interest payment has been omitted.

Correct Answer: C. Fortnightly. Scheduled Banks must file a fortnightly return on their CRR position with the RBI.

Correct Answer: B. Within 7 days of the fortnight end. The fortnightly return is due within seven days from the close of the relevant fortnight.

Correct Answer: B. 3% above the bank rate. The penal interest for the first fortnight of default is at a rate of 3% above the prevailing bank rate.

Correct Answer: D. All of the above. Persistent default in CRR maintenance can lead to penalties, fines, and even prohibition from accepting fresh deposits.

Correct Answer: C. With the bank itself, in a current account with RBI, or as a net balance. Non-scheduled banks have flexibility in how they maintain the required cash reserve.

Correct Answer: C. 3%. Non-scheduled banks must maintain a minimum cash reserve equivalent to 3% of their demand and time liabilities.

Correct Answer: C. Section 24. Section 24 of the Banking Regulation Act deals with the maintenance of the Statutory Liquidity Ratio (SLR).

Correct Answer: B. A situation where the financial sector provides critical services to the real economy without any discontinuity. The RBI’s definition emphasises the continuous provision of essential financial services to the real economy.

Correct Answer: C. Dissipate financial imbalances that arise. The IMF definition includes the system’s ability to handle and resolve financial imbalances that emerge.

Correct Answer: B. Section 17(1). This section mandates the creation of a reserve fund by banking companies established in India.

Correct Answer: C. 25%. As per the increased requirement effective from March 31, 2001, banks must transfer a minimum of 25% of their net profits after tax to the reserve fund.

Correct Answer: C. Staff bonus. The transfer to the reserve fund is to be made after accounting for or providing for the staff bonus.

Correct Answer: C. If the bank has adequate paid-up capital and reserves. Exemption may be recommended if the bank already possesses sufficient capital and reserve levels.

Correct Answer: C. Its paid-up capital. Exemption is possible if the combined amount of the reserve fund and share premium account is equal to or exceeds the paid-up capital.

Correct Answer: C. 21 days. Any appropriation from these funds must be reported to the RBI within twenty-one days.

Correct Answer: B. Foreign banks are exempt from this requirement under Section 17(1). Section 17(1) specifically applies to banking companies incorporated in India; foreign banks are subject to different rules regarding profit retention in India.

Correct Answer: C. 20%. Foreign banking companies must deposit 20% of their annual profits related to their Indian operations with the Reserve Bank of India.

Correct Answer: C. Section 42. Section 42 of the RBI Act mandates Scheduled Banks to maintain a cash reserve.

Correct Answer: C. Having paid-up capital and reserves of at least ₹5 lakh. A key requirement for inclusion is a minimum capital and reserve base of ₹5 lakh.

Correct Answer: C. Demand and time liabilities in India. CRR is calculated as a percentage of the bank’s Net Demand and Time Liabilities (NDTL) within India.

Correct Answer: D. No statutory ceiling or floor rate, as notified by the RBI. The law was amended to remove the fixed ceiling and floor, allowing the RBI to determine the percentage without these statutory limits.

Correct Answer: C. Credit balance in profit and loss account. A bank’s credit balance in its profit and loss account is excluded from the NDTL calculation for CRR.

Correct Answer: C. 90%. SCBs must ensure that their CRR balance on any given day during the fortnight is at least 90% of the average daily requirement for that fortnight.

Correct Answer: C. Scheduled Banks. Section 42 of the RBI Act applies specifically to Scheduled Banks.

Correct Answer: C. Cash Reserve Ratio (CRR). The law was amended to stop the RBI from paying interest on the CRR balances held by banks.

Correct Answer: B. Fortnightly. Scheduled Banks submit a return detailing their CRR position on a fortnightly basis.

Correct Answer: B. 5% above the bank rate. The penalty rate increases to 5% above the bank rate for defaults continuing beyond the first fortnight.

Correct Answer: B. Prohibit the bank from accepting fresh deposits. Persistent non-compliance can lead to the RBI restricting the bank from taking new deposits.

Correct Answer: B. Section 18. Non-Scheduled Banks are required to maintain a cash reserve as per the provisions of Section 18 of the Banking Regulation Act.

Correct Answer: B. As cash with themselves, in a current account with RBI, or as a net balance. Non-scheduled banks have these options for maintaining their required cash reserve.

Correct Answer: B. 3%. Non-scheduled banks are statutorily required to maintain a minimum cash reserve of three per cent of their demand and time liabilities.

Correct Answer: C. Monthly. Non-scheduled banks must submit a monthly return detailing their cash reserve position.

Correct Answer: C. Incremental credit to the automobiles, housing, and MSME sectors. The RBI has incentivised lending to these specific sectors by exempting incremental credit from CRR.

Correct Answer: C. Section 24. Section 24 of the Banking Regulation Act governs the requirement for banks to maintain a Statutory Liquidity Ratio.

Correct Answer: B. As assets in India. SLR mandates banks to hold a certain percentage of their NDTL in specified liquid assets within India.

Correct Answer: C. 40%. While there is no statutory minimum, the RBI cannot set the SLR requirement higher than 40% of NDTL.

Correct Answer: B. 3% above the bank rate. The penalty for the first instance of SLR shortfall is penal interest at 3% above the bank rate.