Banking Sector in India: UPSC Previous Year Questions (Indian Economy)
4 previous year UPSC Prelims questions on Banking Sector in India (Indian Economy). Choose an option to see the answer and explanation.
Explanations state facts as of the year each question was asked; words like “recently” refer to that year.
Showing 1–4 of 4 questions
UPSC 2025Indian Economy · Banking Sector in India
Q1. Which of the following are the sources of income for the Reserve Bank of India? 1. Buying and selling Government bonds 2. Buying and selling foreign currency 3. Pension fund management 4. Lending to private companies 5. Printing and distributing currency notes Select the correct answer using the code given below.
Explanation
The Reserve Bank of India is the central bank of the country. It earns income primarily through monetary operations, management of currency, and foreign exchange transactions
Statement 1 is correct: The RBI conducts open market operations involving the buying and selling of government securities (bonds). It earns income through interest receipts and capital gains on these transactions.
Statement 2 is correct: The RBI manages India’s foreign exchange reserves and intervenes in forex markets to stabilize the rupee. Gains from currency transactions contribute to its income.
Statement 3 is incorrect: RBI does not manage pensions for citizens or the government. Pension Fund Regulatory and Development Authority (PFRDA) governs pension systems like NPS. RBI only manages government accounts and public debt, not pension
Statement 4 is incorrect: The RBI does not lend directly to private companies. It lends to commercial banks and financial institutions as part of monetary policy and financial regulation, but lending to private companies is not a source of income.
Statement 5 is correct: RBI has the sole right to print and issue currency notes in India. It earns income through seigniorage, the profit made from issuing currency notes, which is the difference between the face value and the cost of printing. Seigniorage = Face value of currency - cost of printing it. For example, printing a 100 note may cost 3, giving a profit of 97.
Exam tip:
For S4, Would the central bank be giving out loans to corporates? Then what would commercial banks do? Hence if " Lending to private companies" is not even the job of RBI, how could it be its source of income? Hence likely false, eliminating options B and C.
UPSC 2025Indian Economy · Banking Sector in India
Q2. Consider the following statements: 1. The Reserve Bank of India mandates all the listed companies in India to submit a Business Responsibility and Sustainability Report (BRSR). 2. In India, a company submitting a BRSR makes disclosures in the report that are largely non-financial in nature. Which of the statements given above is/are correct?
Explanation
Statement 1 is incorrect: The Reserve Bank of India (RBI) does not mandate the submission of the Business Responsibility and Sustainability Report (BRSR). Instead, the Securities and Exchange Board of India (SEBI) mandates this requirement. Since 2022, SEBI has required the top 1,000 listed companies by market capitalization to submit BRSR as part of their annual reporting to improve transparency on ESG (Environmental, Social, and Governance) matters.
Statement 2 is correct: BRSR disclosures primarily involve non-financial information related to a company’s social responsibility, sustainability initiatives, environmental impact, governance, and stakeholder engagement. It complements financial reports by providing stakeholders with a broader understanding of a company’s impact and sustainable practices.
Exam tip:
For S1, The RBI is the regulator of banks and monetary policy, not of companies and their disclosures. Who typically regulates listed companies? That’s clearly SEBI (Securities and Exchange Board of India). Hence an error in S1. Also, "All listed companies" is an extreme phrase. Hence S1 is likely false. For S2, The very name suggests reporting on: Environmental, social, and governance (ESG) issues. Things like carbon footprint, gender diversity, ethical governance, etc. These are clearly non-financial parameters, unlike profits, losses, or balance sheets. Hence likely true.
UPSC 2025Indian Economy · Banking Sector in India
Q3. Consider the following statements in respect of RTGS and NEFT: 1. In RTGS, the settlement time is instantaneous while in case of NEFT, it takes some time to settle payments. 2. In RTGS, the customer is charged for inward transactions while that is not the case for NEFT. 3. Operating hours for RTGS are restricted on certain days while this is not true for NEFT. Which of the statements given above is/are correct?
Explanation
RTGS and NEFT are examples of Inter Bank Transfer is a special service that allows you to transfer funds electronically to accounts in other banks in India.
Statement 1 is correct:
RTGS (Real Time Gross Settlement) processes transactions instantly and in real time. NEFT (National Electronic Funds Transfer) processes transactions in half-hourly batches, so settlement is not instantaneous and can take up to 2 hours.
Statement 2 is incorrect: As per RBI guidelines, no charges are levied for inward transactions (receiving funds) in both RTGS and NEFT systems. Charges, if any, are typically for outward transactions (sending money).
Statement 3 is incorrect: Both RTGS and NEFT are now available 24x7x365, including weekends and bank holidays. There are no restricted hours for either system as per current RBI guidelines.
Additional insight:
Other Modes of Inter Bank Transfer include:
IMPS (Immediate Payment Service): Enables instant, 24x7 money transfers between banks using internet banking or mobile apps. UPI (Unified Payments Interface): Facilitates instant interbank transfers via mobile apps, using a virtual payment address. Society for Worldwide Interbank Financial Telecommunications (SWIFT): It is used for international interbank transfers, connecting banks globally for cross-border payments.
Exam tip:
For S1, RTGS = Real-Time Gross Settlement, "Real time" clearly indicates instantaneous, and NEFT is not real time, it must be your real life experience. Hence S1 is likely true. For S2, Inward transaction = receiving money. Have you ever seen in your real life that you receive money and a charge is deducted? No! Hence likely false. Thus eliminate options C and D.
UPSC 2025Indian Economy · Banking Sector in India
Q4. Consider the following countries: 1. United Arab Emirates 2. France 3. Germany 4. Singapore 5. Bangladesh How many countries amongst the above are there other than India where international merchant payments are accepted under UPI?
Explanation
Unified Payments Interface (UPI) is an instant, real-time payment system developed by the National Payments Corporation of India (NPCI) in 2016. It enables users to transfer funds between bank accounts, pay bills, and make merchant payments seamlessly through a single mobile application. UPI supports both peer-to-peer and person-to-merchant transactions, operates 24x7, and eliminates the need to enter bank details for each transaction, making digital payments fast, secure, and convenient. List of countries where international merchant payments are accepted at select merchant outlets. Sr. No. Country Name
1. Bhutan
2. France
3. Mauritius
4. Nepal
5. Singapore
6. Sri Lanka
7. UAE Therefore, only three countries among the given options (UAE, France, Singapore) accept international merchant payments via UPI, apart from India.
Answer key for these questions
Q
UPSC year
Correct answer
1
2025
(d) I, II and V
2
2025
(b) II only
3
2025
(a) I only
4
2025
(b) Only three
Frequently asked questions
How many previous year UPSC questions are there on Banking Sector in India?
This page covers 4 previous year UPSC Prelims GS Paper-I questions on Banking Sector in India (Indian Economy), asked from 1997 to 2025. Each has the correct answer and an explanation.
How should I use previous year UPSC questions for Prelims?
Attempt each question first, then open the answer and read the explanation for every option. Repeat by chapter, and track which statements UPSC reuses across years. Previous year questions show the exam pattern and difficulty level.
Which years are covered for Banking Sector in India?
Questions on Banking Sector in India (Indian Economy) are available for 24 years, from 1997 to 2025. Use the Year filter to practise a single paper.
