Banking Sector in India: UPSC Previous Year Questions (Indian Economy)
74 previous year UPSC Prelims questions on banking make this the largest Indian Economy chapter, from 1997 to 2025, across 24 exam years. UPSC returns to the RBI’s functions and income, monetary policy tools, payment systems such as UPI, RTGS and NEFT, new bank types and capital rules. The explanations show how each tool or institution works in practice.
Explanations state facts as of the year each question was asked; words like “recently” refer to that year.
Showing 71–74 of 74 questions
Browse by year
UPSC 1999Indian Economy · Banking Sector in India
Q71. The farmers are provided credit from a number of sources for their short and long term needs. The main sources of credit to the farmers include:
Explanation
Farmers get resources from various sources such as Primary Agricultural Cooperative Societies, Commercial Banks, District Central Cooperative Banks (DCCB), the lead banks such as SBI and PNB, IRDP and IFFCO. Farmers also get credit from informal sources such as private money lenders. Primary Agricultural Cooperative Societies (PACS) are grassroots-level cooperative institutions that provide short-term and medium-term loans to farmers for agricultural activities. Commercial Banks both public and private sector banks offer a range of credit products to farmers, including crop loans and investment loans. Regional Rural Banks (RRBs) were established to enhance rural credit, RRBs focus on providing credit to small and marginal farmers, agricultural laborers, and rural artisans. Despite the growth of institutional credit, many farmers still rely on private money lenders, especially in regions where institutional penetration is low. Options (b), (c) and (d) are incorrect:
NABARD and the Reserve Bank of India (RBI) play crucial roles in refinancing and regulating rural credit institutions but they do not provide direct loans to farmers. District Central Cooperative Banks (DCCBs) and Lead Banks facilitate credit but are not direct sources. Development programs like the Integrated Rural Development Programme (IRDP) and Jawahar Rozgar Yojana (JRY) aim to promote self-employment and generate wage employment, respectively, but do not directly provide agricultural credit. Large Scale Multi-purpose Adivasis Programme: This was a government program aimed at the socio-economic development of tribal areas but is not a credit source for farmers. IFFCO (Indian Farmers Fertilizer Cooperative Limited) is a fertilizer cooperative and does not directly provide credit to farmers. It primarily supplies fertilizers and agricultural inputs.
UPSC 1998Indian Economy · Banking Sector in India
Q72. The banks are required to maintain a certain ratio between their cash in hand and total assets. This is called:
Explanation
The Statutory Liquidity Ratio (SLR) is the minimum percentage of a bank’s net demand and time liabilities (NDTL) that it must maintain in the form of liquid assets such as cash, gold, or government-approved securities. This requirement ensures that banks have sufficient liquidity to meet withdrawal demands and maintain financial stability. The Re-serve Bank of India (RBI) sets and regulates the SLR to control the expansion of bank credit and ensure the solvency of banks. As of December 6, 2024, the SLR is set at 18%. The RBI has the authority to adjust this rate as part of its monetary policy toolkit.
UPSC 1998Indian Economy · Banking Sector in India
Q73. The accounting year of the Reserve Bank of India is:
Explanation
As of 1998, the Reserve Bank of India (RBI) operated on an accounting year spanning from July to June. This system had been in place since March 11, 1940, when the RBI transitioned its accounting period from January-December to July-June. However, in 2020, the RBI decided to align its accounting year with the Government of India’s fiscal year, which runs from April to March. This change was implemented to enhance the effectiveness of monetary policy and fiscal operations. Consequently, the accounting year 2020-21 was a transitional period of nine months, from July 2020 to March 2021. Subsequently, from April 2021 onwards, the RBI adopted the April-March accounting cycle
UPSC 1997Indian Economy · Banking Sector in India
Q74. The sum of which of the following constitutes Broad Money in India? 1. Currency with the public 2. Demand deposits with banks 3. Time deposits with banks 4. Other deposits with RBI Choose the correct answer using the codes given below:
Explanation
The total stock of money in circulation among the public at a particular point of time is called money supply.
Option (b) is correct: Broad money (M3) represents the total money supply in the economy that is readily available for spending. It includes currency with the public and various bank deposits (demand and time deposits), but not the deposits that commercial banks hold with the RBI. Broad money (M3) in India includes:
Currency with the public: This refers to all currency notes and coins in circulation outside of banks. Demand deposits with banks: These are checking accounts or current accounts that allow depositors to withdraw funds on demand. Time deposits with banks: These are savings accounts or fixed deposits where funds are held for a specific period and cannot be withdrawn before maturity without penalty. "Other deposits with RBI" are a component of Reserve Money (M0), also known as high-powered money. These deposits are held by commercial banks with the Reserve Bank of India (RBI) and are part of the monetary base. While they are important for monetary policy, they are not included in the definition of broad money (M3).
Answer key for these questions
Q
UPSC year
Correct answer
71
1999
(a) the Primary Agricultural Cooperative Societies, commercial banks, RRBs and private money lenders
72
1998
(b) SLR (Statutory Liquid Ratio)
73
1998
(b) July-June
74
1997
(b) 1, 2 and 3
What UPSC has tested in Banking Sector in India
The Banks Board Bureau selects the chairmen of public sector banks.
The National Payments Corporation of India links all the ATMs in India.
The Reserve Bank of India is responsible for maintaining price stability by controlling the money supply; it also acts as the lender of last resort.
In RTGS the settlement is instantaneous, while NEFT settles in batches.
Payment Banks and Small Finance Banks were allowed to promote financial inclusion.
Participatory Notes are issued by registered foreign portfolio investors to overseas investors.
The Service Area Approach was implemented under the Lead Bank Scheme.
Frequently asked questions
How many previous year UPSC questions are there on Banking Sector in India?
This page covers 74 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.
What is the lender of last resort function of the RBI?
The central bank lends to banks that are solvent but short of liquidity when no other source is available, usually during a crisis. This protects the financial system from a loss of confidence and a run on banks.
How do RTGS and NEFT differ?
RTGS settles each payment individually and instantly, and is meant for large-value transfers. NEFT settles payments in half-hourly batches. Both are operated by the Reserve Bank of India, and both now work round the clock.
What is the Banks Board Bureau?
A body set up by the Government of India in 2016 to select the chairmen and heads of public sector banks and to advise on their governance and capital-raising. It was later replaced by the Financial Services Institutions Bureau in 2022.
What are Participatory Notes?
Instruments issued by registered foreign portfolio investors to overseas investors who wish to invest in Indian securities without registering with SEBI themselves. They are also called P-Notes and are regulated by SEBI.
