RBI's recent data shows that banks' Aggregate Deposits grew at 10.2% while Aggregate Advances grew at 14.8% in FY2024. What does this indicate?
ABanks are becoming less risky
BCredit growth is outpacing deposit growth, requiring banks to rely more on other funding sources
CDeposits are becoming more expensive relative to advances
DBoth B and C are correct
Correct Answer:
D. Both B and C are correct
Explanation:
Faster advance growth than deposit growth indicates banks must source funds from market borrowings, wholesale deposits, or other expensive channels, impacting profitability and liquidity management.
Which committee's recommendations led to the implementation of Basel III norms in Indian banking?
ANarasimham Committee
BPatel Committee
CChakrabarty Committee
DBasel Committee on Banking Supervision
Correct Answer:
D. Basel Committee on Banking Supervision
Explanation:
Basel III norms were developed by the Basel Committee on Banking Supervision and adopted globally to strengthen banking sector resilience post-2008 financial crisis.
What is the concept of 'Too Big to Fail' in banking regulation?
ALarge banks always make profits
BSome banks are systemically important and their failure could destabilize the entire financial system
COnly large banks should be regulated
DLarge banks should not be subject to stress testing
Correct Answer:
B. Some banks are systemically important and their failure could destabilize the entire financial system
Explanation:
The 'Too Big to Fail' concept recognizes that systemically important banks require stricter regulation and capital requirements because their failure could trigger a financial crisis.
In a situation where a bank's Core Banking Solution (CBS) faces a system failure, which RBI regulation requires it to have a business continuity plan?
AMaster Direction on Payment Systems
BOperational Risk Management Framework
CIT Risk Management Guidelines
DAll of the above
Correct Answer:
D. All of the above
Explanation:
RBI's multiple guidelines including IT Risk Management and Operational Risk frameworks mandate banks to have robust business continuity and disaster recovery plans to ensure service continuity.
What is the Standing Liquidity Facility (SLF) introduced by RBI?
AA permanent lending facility for scheduled banks to borrow funds at specified rates
BA deposit scheme for retail customers
CA government borrowing mechanism
DA credit rating system for NBFCs
Correct Answer:
A. A permanent lending facility for scheduled banks to borrow funds at specified rates
Explanation:
SLF is a standing facility introduced by RBI allowing scheduled banks to borrow funds against government securities, providing liquidity at a specified spread over the policy rate.
Which of the following best describes 'Securitization' in banking?
AConverting illiquid assets into tradable securities backed by cash flows
BA method of encrypting bank data
CInsurance against operational risks
DA process of merging two banks
Correct Answer:
A. Converting illiquid assets into tradable securities backed by cash flows
Explanation:
Securitization is the process of converting illiquid assets (like loans) into tradable securities that are backed by the underlying cash flows of those assets.
