Unit 6: Other activities of commercial banks - Practice Quiz

1 Which of the following is an example of a para-banking activity of a commercial bank?

2 A neo bank is best described as a bank that:

3 Financial inclusion primarily aims to:

4 In India, MCLR stands for:

5 Two-factor authentication (2FA) improves security by requiring:

6 A digital wallet is mainly used to:

7 Peer-to-peer (P2P) lending connects:

8 A smart contract is best described as:

9 Green finance refers to funding that supports:

10 In ESG banking, the letter 'S' stands for:

11 Open banking APIs allow banks to:

12 How does AI help in detecting fraud in banking?

13 A common use of AI for customer service personalization in banks is:

14 Cross-border transactions involve the transfer of funds:

15 Which activity is an example of a bank outsourcing a non-core function?

16 Which of the following is an example of technology in banking?

17 Which of the following is a basic banking activity?

18 The term fintech is a combination of which two words?

19 The MCLR system was introduced primarily to:

20 Sustainable banking focuses on balancing profit with:

21 A bank's cost of borrowing is 6%, its return on net worth is 10%, operating cost is 1%, and the negative carry on CRR adds 0.25%. If the marginal cost of funds (combining borrowings and net worth) works out to 6.4%, which component is typically given the highest weight (92%) in computing the Marginal Cost of Funds under MCLR?

22 A customer's final lending rate under MCLR is quoted as . If the one-year MCLR is 8.5% and the bank applies a spread of 1.5% covering business strategy and credit risk premium, what is the effective lending rate?

23 A startup launches a fully digital banking service with mobile-first onboarding, no physical branches, and partners with a licensed bank to hold customer deposits because it lacks its own banking licence. This entity is best classified as a:

24 Which of the following is considered a para-banking activity undertaken by a commercial bank?

25 A trade finance platform uses a smart contract so that payment to the exporter is automatically released once a shipping document is verified on the blockchain. What key property of smart contracts makes this possible?

26 An AI fraud detection system flags a transaction because a customer who normally spends within one city suddenly makes a high-value purchase abroad at 3 AM. Which AI technique is primarily being applied here?

27 A banking app asks for a password and then a one-time code sent to the user's registered phone. These two factors represent which categories of authentication?

28 A fintech app, with customer consent, retrieves account balances and transaction history from multiple banks through standardized interfaces. Which technology makes this secure data sharing possible?

29 On a peer-to-peer lending platform, what is the primary role of the platform itself in the transaction?

30 A bank issues a bond whose proceeds are earmarked exclusively for financing solar power plants and energy-efficient buildings. This instrument is best described as a:

31 In ESG-based lending, a bank denies a loan to a company with a strong profit record but a poor record of labour rights and board transparency. Which ESG dimensions influenced this decision?

32 Under financial inclusion initiatives, a 'no-frills' / Basic Savings Bank Deposit Account is designed primarily to:

33 An Indian importer needs to pay a supplier in Europe. The bank uses a global messaging network to securely transmit the payment instruction to the correspondent bank abroad. This messaging network is:

34 A customer loads from their bank account into a mobile app and uses it to pay merchants without re-entering card details each time. This stored-value facility is an example of a:

35 A bank contracts a third-party vendor to manage its data centre operations and call centre. According to prudent risk management, which responsibility can the bank NOT transfer through such outsourcing?

36 A bank's AI engine analyses a customer's transaction history and spending pattern to recommend a tailored investment product at the right moment through the mobile app. This is an application of:

37 Which core banking technology enables a customer to access their account and transact from any branch of the bank rather than only the branch where the account was opened?

38 When a bank undertakes to collect cheques, bills, and dividends on behalf of a customer and credit the proceeds to their account, the bank is acting in which capacity?

39 Which statement best distinguishes a fintech company from a traditional commercial bank?

40 A manufacturing firm applies for a loan to install effluent treatment plants and reduce carbon emissions. A bank offering a lower interest rate specifically to fund such environmentally positive projects is practising:

41 A bank's MCLR is computed using four components. If the marginal cost of funds forms 92% of the weighting and return on net worth forms the balance, and the marginal cost of borrowings is while the return on net worth is , what is the approximate blended rate from these two components alone (ignoring the deposit portion split)?

42 Under the MCLR regime, why can a borrower on a floating-rate loan experience a delay in benefiting from a repo rate cut, which was a key reason RBI mandated the External Benchmark Lending Rate (EBLR) for retail loans?

43 Which of the following best explains why RBI requires banks to undertake certain para-banking activities (like insurance or mutual fund distribution) through separate subsidiaries or with specific caps rather than on the bank's own balance sheet?

44 In the Indian regulatory context, what is the fundamental limitation of a 'neo bank' compared to a licensed commercial bank?

45 A trade-finance smart contract is designed to auto-release payment to an exporter once an IoT sensor confirms goods delivery. What is the key 'oracle problem' that threatens the reliability of this arrangement?

46 A corporate treasurer notes that a SWIFT-based cross-border payment passes through two correspondent banks before reaching the beneficiary. Which problem does this correspondent chain MOST directly create, that initiatives like SWIFT gpi and CBDC bridges aim to solve?

47 Under an open banking framework based on the 'consent-driven data sharing' model (such as India's Account Aggregator), which statement is correct regarding the Account Aggregator (AA) itself?

48 A security analyst argues that receiving an OTP via SMS is a weaker second factor than a hardware token or an authenticator app. Which attack vector most strongly supports this argument?

49 A bank's AI fraud model flags transactions with high recall but low precision. For a fraud-detection use case, what is the primary operational consequence the bank must manage?

50 RBI regulations on P2P lending platforms impose an aggregate exposure cap per lender across all platforms. What is the core prudential rationale behind this specific limit?

51 The JAM trinity (Jan Dhan–Aadhaar–Mobile) is credited with advancing financial inclusion in India. Which outcome best demonstrates its synergistic rather than merely additive effect?

52 A bank integrates ESG into credit appraisal and discovers a profitable borrower with significant unpriced carbon-transition risk. From a risk-management standpoint, how should this 'transition risk' be best characterised?

53 A company issues a 'green bond' but later uses the proceeds for general corporate purposes unrelated to the stated environmental project. What is this practice called, and why is it a key concern in green finance?

54 RBI guidelines permit banks to outsource non-core functions but hold the bank fully accountable for the service provider's actions. Which principle does this reflect, and what key activity can NOT be outsourced?

55 Consider a 'closed', a 'semi-closed', and an 'open' Prepaid Payment Instrument (PPI). Which statement correctly distinguishes an open-system PPI?

56 A bank deploys an AI recommendation engine that personalizes product offers. Regulators raise concern that it may create 'digital redlining'. What does this risk specifically describe?

57 A legacy bank runs its core banking system on a monolithic mainframe and wants to adopt a microservices architecture. What is the single most significant challenge of this migration beyond cost?

58 A customer presents a 'crossed cheque' marked 'account payee only'. What is the precise legal effect of this crossing on how the cheque can be settled?

59 A fintech lender uses a 'Banking-as-a-Service' (BaaS) model. In this arrangement, which risk does the sponsoring licensed bank primarily bear that regulators scrutinise closely?

60 Two banks consider using a wholesale CBDC bridge for cross-border settlement to achieve 'Payment-versus-Payment' (PvP). What specific risk does PvP settlement eliminate?