Banking – Multiple Choice Questions (MCQs)

1. 25. What is 'Capital Adequacy Ratio (CAR)'?

   • A. The ratio of a bank's capital to its risk-weighted assets
   • B. The ratio of a bank's liquid assets to its total assets
   • C. The ratio of a bank's loans to its deposits
   • D. The ratio of a bank's profits to its expenses

2. 26. What is 'Credit Rating'?

   • A. An assessment of the creditworthiness of a borrower
   • B. The interest rate charged on a loan
   • C. The amount of loan disbursed
   • D. The collateral provided for a loan

3. 27. What is 'Securitization'?

   • A. The process of converting loans into marketable securities
   • B. The process of writing off bad loans
   • C. The process of merging two banks
   • D. The process of nationalizing private banks

4. 28. What is 'Moral Suasion'?

   • A. Informal requests or pressure exerted by the central bank on commercial banks
   • B. Legal directives issued by the central bank
   • C. Financial incentives provided by the central bank
   • D. Punitive actions taken by the central bank

5. 29. What is 'Open Market Operations (OMOs)'?

   • A. Buying and selling of government securities by the central bank
   • B. Regulation of interest rates by the central bank
   • C. Control over the cash reserve ratio
   • D. Issuance of new currency notes

6. 30. What is 'Bank Rate'?

   • A. The rate at which the central bank lends long-term funds to commercial banks
   • B. The rate at which commercial banks lend to each other
   • C. The rate at which commercial banks borrow short-term funds from the central bank
   • D. The interest rate on savings accounts

7. 31. What is 'Inflation Targeting'?

   • A. A monetary policy strategy where the central bank aims to maintain inflation within a specific range
   • B. A fiscal policy strategy to control prices
   • C. A method to forecast future inflation rates
   • D. A government scheme to provide subsidies

8. 32. What is 'Priority Sector Lending (PSL)'?

   • A. Mandatory lending by banks to specific sectors of the economy
   • B. Lending to government employees
   • C. Lending to large corporations
   • D. Lending at concessional interest rates

9. 33. What is 'Microfinance'?

   • A. Providing small loans to low-income individuals and groups
   • B. Lending to large industries
   • C. International banking transactions
   • D. Government schemes for financial assistance

10. 34. What is 'Ombudsman' in banking?

    • A. A senior bank official
    • B. An external dispute resolution mechanism for bank customers
    • C. A government regulator for banks
    • D. An association of bank employees

11. 35. What is 'SARFAESI Act' related to?

    • A. Recovery of Non-Performing Assets
    • B. Regulation of foreign exchange
    • C. Establishment of new banks
    • D. Merger of banks

12. 36. What is 'Debit Card'?

    • A. A card that allows you to withdraw money directly from your bank account
    • B. A card that provides a line of credit
    • C. A pre-paid card
    • D. A loyalty card