MONEY AND BANKING (Part – I)

Total Questions: 150

91. Arrange the following in chronological order : [Chhattisgarh P.C.S (Pre) 2017]

1. Nationalization of 14 major banks
2. Nationalization of SBI
3. Nationalization of RBI
4. Nationalization of LIC

Codes :

(a) 3, 2, 4 , 1
(b) 2, 3, 4, 1
(C) 3, 4, 2, 1
(d) 4, 3, 2, 1

Correct Answer: (a) 3, 2, 4 , 1

Solution:Institution Year

3. Nationalization of RBI - 1949
2. Nationalization of SBI - 1955
4. Nationalization of LIC - 1956
1. Nationalization of 14 major banks - 1969

Hence, the correct chronological order is 3, 2, 4, 1.

92. Consider the following statements : [U.P.P.C.S. (Spl.) (Mains) 2004]

1. Gorwala Committee's recommendation led to the establishment of State Bank of India.
2. Six Commercial Banks were nationalized on April 15, 1980.

Which one of the statements given above is/are correct ?

(a) 1 only
(b) 2 only
(C) Both 1 and 2
(d) Neither 1 nor 2

Correct Answer: (C) Both 1 and 2

Solution:The All-India Rural Credit Survey Committee, which is also known as A.D. Gorwala Committee had recommended to the establishment of State Bank of India through combining the Imperial Bank of India and some State's affiliated banks. The six commercial banks were nationalized on April 15, 1980 by the Government of India. Hence, both of the given statements are correct.

93. The number of public sector banks in India (excluding State Bank of India Group ) is presently : [U.P.P.C.S (Mains) 2011]

(a) 28
(b) 27
(C) 20
(d) 19

Correct Answer: (C) 20

Solution:As per the question period, the total number of public sector banks in India (excluding SBI Group) was 20. To improve the condition of public sector banks, the Modi government adopted the process of merger in two different phases. In the first phase, five Associate Banks of SBI (and Bharatiya Mahila Bank) were merged with the country's largest public sector bank State Bank of India. Apart from this, Vijaya Bank and Dena Bank were merged with Bank of Baroda. In addition to this, subsequent to the enhancement of equity stake by LIC of India, the then public sector IDBI Bank was re-categorized as a private sector bank for regulatory purposes with effect from 21 January, 2019. In the second phase, 10 public sector banks were merged with effect from April 1, 2020. A total of six weak banks were merged into four big banks. Oriental Bank of Commerce and United Bank of India were merged with Punjab National Bank. Allahabad Bank was merged with Indian Bank. Syndicate Bank was merged with Canara Bank. Andhra Bank and Corporation Bank were merged with Union Bank of India.

At present, there are 12 public sector scheduled commercial banks (including State Bank of India) in the country.

List of Public Sector Banks

1. State Bank of India

2. Bank of Baroda

3. Bank of India

4. Bank of Maharashtra

5. Canara Bank

6. Central Bank of India

7. Indian Bank

8. Indian Overseas Bank

9. Punjab National Bank

10. Punjab & Sind Bank

11. Union Bank of India

12. UCO Bank

94. The recent amalgamation of public sector banks in India is aimed at multiple gains. [U.P.B.E.O.(Pre) 2019]

Economies of scale
Improved access to capital
Covering larger geographical areas
Banks of global size

Select the correct benefits using the codes given below :

(a) 1 and 2 only
(b) 2 and 3 only
(C) 1, 2 and 4 only
(d) 1, 2, 3 and 4 all

Correct Answer: (d) 1, 2, 3 and 4 all

Solution:In the biggest consolidation exercise in the banking space, the government in August, 2019 had announced the amalgamation of 10 public sector banks into 4 bigger and stronger banks. This merger came into effect from April 1, 2020. After this, the total number of public sector banks (including SBI) is reduced to 12. The amalgamation of public sector banks has following significant benefits:

Economies of scale;

Improve access to capital;
Covering larger geographical areas;
Banks of global size;
Reducing operational risks;
Concentrated payment and greater settlement flows;
Better management of banking capital etc.

95. With reference to the government of public sector banking in India, consider the following statements : [U.P.S.C (Pre) 2018]

1. Capital infusion into public sector banks by the Government of India has steadily increased in the last decade.
2. To put the pubic sector banks in order, the merger of associate banks with the parent State Bank of India has been affected.

Which of the statements given above is/are correct?

(a) 1 only
(b) 2 only
(C) Both 1 and 2
(d) Neither 1 nor 2

Correct Answer: (b) 2 only

Solution:In the period between 2008-09 and 2016-17, Government of India infused cumulatively Rs. 1,18,724 crore in public sector banks. But yearwise capital infusion has not steadily increased in this period, there have been falls in between. Thus, statement 1 is incorrect.

Merger of five Associate Banks of SBI and Bharatiya Mahila Bank (BMB) in State Bank of India has been affected in 2017 to put the public sector banks in order. One of the desired objectives of consolidation of public sector banks is to improve their efficiency and streamlining of banking operations. Hence, statement
2 is correct.

96. With reference to 'EASE-Index', which of the following statements is/are correct? [U.P.R.O/A.R.O (Mains) 2021]

1. It is a way to measure the performance of the public sector banks.
2. It measures the ease of doing business of MSME in India.

Select the correct answer using the code given below-code :

(a) Only 1
(b) Only 2
(C) Both 1 and 2
(d) Neither 1 nor 2

Correct Answer: (a) Only 1

Solution:EASE-Index' (Ease Banking Reforms Index) is a way to measure the performance of the public sector banks. The EASE (Enhanced Access and Service Excellence) is a no- table reform agenda for public sector banks that aims to strengthen banking.

It was launched in January 2018 jointly by the government and PSBs.
It was commissioned through Indian Banks' Association and authored by Boston Consulting Group.
It aims to foster new-age reforms in PSBs to improve profitability, asset quality, customer service and digital capabilities.

97. Consider the following statements : [U.P.S.C (Pre) 2010]

The functions of commercial banks in India include

1. Purchase and sale of shares and securities on behalf of customers.
2. Acting as executors and trustees of wills.

Which of the statements given above is/are correct?

(a) 1 only
(b) 2 only
(C) Both 1 and 2
(d) Neither 1 nor 2

Correct Answer: (C) Both 1 and 2

Solution:A commercial bank is a kind of financial institution which carries all the operations related to deposits and withdrawal of money for the general public, providing loans for investment etc. Other functions of the commercial bank are purchase and sale of shares and securities on behalf of customers and acting as executors and trustees of wills.

Commercial Banks in India perform several critical functions in the Indian Financial System, which makes them significant for the Indian economy. Some of their crucial functions and significance can be seen as follows:

Accepting Deposits: They accept various types of deposits from the public which form the main source of funds.
Providing Loans and Advances: Banks are the primary source of funds for personal finance, agriculture, industrial sectors, and other economic activities through loans and credit facilities.
Financial Intermediation: They facilitate financial mobility by mobilizing savings from depositors to borrowers, thereby enhancing economic efficiency.
Financial Inclusion: As the largest category of banking networks in India, they cater to the maximum number of banking customers in India. This aids the cause of Financial Inclusion in India.
Promotion of Digital Economy: They also provide sophisticated digital banking services that
include mobile banking, internet banking, etc. This helps in the promotion of the Digital Economy and makes financial transactions seamless and more accessible to the general public.

98. Which of the following is the commercial bank of public sector? [U.P.U.D.A./L.D.A (Pre) 2006]

(a) ICICI
(b) H.D.F.C
(C) Indian Overseas Bank
(d) U.T.I. bank

Correct Answer: (C) Indian Overseas Bank

Solution:In Public Sector Banks (PSBs), majority of stake (i.e. at least 51%) is held by the Government. State Bank of India, Indian Overseas Bank, Punjab National Bank etc. are public sector banks. At present, there are 12 public sector banks (including State Bank of India) in the country.

Public sector banks in India have a history dating back to the early 20th century when the need for extending banking facilities for social inclusion, economic, and agricultural support became important. The high moment in PSBs' evolution history occurred when 14 major commercial banks were nationalized by then Prime Minister Indira Gandhi in 1969. This move was purposed at increasing the reach of banking services in the rural and semi-urban areas and cater to the credit requirements of various population segments.
Phase 2 of nationalization occurred in 1980, in which six more banks were nationalized. The number of bank branches rose dramatically across the countryside, and this era witnessed enhanced banking services in the neglected sectors of the country. In the 1990s after liberalization, banking in India underwent a sea of change, but public sector banks still remained the nucleus of the financial firmament of India.

99. Which of the following is the commercial bank of public sector? [U.P.U.D.A./L.D.A (Pre) 2001]

(a) Allahabad Bank
(b) Punjab and Sind bank
(C) Bank of Punjab
(d) Punjab National bank

Correct Answer: (C) Bank of Punjab

Solution:Among the given banks, Banks of Punjab was a private bank In 2005, Bank of Punjab and Centurion Bank have been merged to from Centurian Bank of Punjab.

100. Which one of the following is not a nationalized bank? [U.P.P.C.S (Spl.) (Mains) 2004]

(a) Bank of Baroda
(b) Canara Bank
(C) ICICI Bank
(d) Punjab National Bank

Correct Answer: (C) ICICI Bank

Solution:ICICI (Industrial Credit and Investment Corporation of India) was formed in 1955 at the initiative of the World Bank, the Government of India and representatives of Indian Industry. The principal objective was to create a development financial institution for providing medium and long-term project financing to Indian business. ICICI bank was incorporated in 1994 as a part of the ICICI group. ICICI bank is a leading private sector bank in India. In 1999, ICICI become the first Indian company and the first bank or financial institution from non-Japan Asia to be listed on the New York Stock Exchange. Rest are nationalized Banks.

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