All questions of Banking of India for UPSC CSE Exam

Understanding the Pairs
Let’s evaluate each pair to determine how many are correctly matched.
1. Repo rate : Policy rate set by the central bank
- This pair is correctly matched.
- The repo rate is indeed the rate at which the central bank lends money to commercial banks, acting as a key tool for monetary policy.
2. 91-day Treasury Bill yield : Long-term government security yield
- This pair is incorrectly matched.
- A 91-day Treasury Bill is a short-term security, typically issued for 3 months, which means its yield is associated with short-term financing rather than long-term.
3. 182-day Treasury Bill yield : Short-term government security yield
- This pair is correctly matched.
- Similar to the 91-day Treasury Bill, a 182-day Treasury Bill is also a short-term security, making this pair accurate.
4. Basel III norms : Prudential regulatory framework for banks
- This pair is correctly matched.
- Basel III is indeed a global regulatory framework established to strengthen bank capital requirements and promote financial stability.
Conclusion: Count of Correct Matches
- Correct matches: 1 (Repo rate) + 1 (182-day Treasury Bill yield) + 1 (Basel III norms) = 3 pairs.
- Incorrect match: 2 (91-day Treasury Bill yield).
Thus, the correct answer is that only three pairs are correctly matched, making option 'C' the right choice.

Analysis of Statements
To determine the correctness of the statements regarding India's monetary policy and banking reforms, let’s analyze each one in detail.
Statement 1: Status Quo on Repo Rate Until January 2022
- This statement is incorrect. The MPC of India actually began increasing the repo rate in May 2022, reacting to rising inflation. Prior to that, the repo rate had been held steady, but it did not maintain a status quo until January 2022.
Statement 2: Monetary Tightening Cycle in April 2022
- This statement is correct. The RBI initiated a monetary tightening cycle in April 2022 as headline inflation crossed the upper limit of its tolerance band (which is typically set at 6%). The MPC raised interest rates to curb inflationary pressures.
Statement 3: Banking Consolidation Process in 1998
- This statement is incorrect. The banking consolidation process in India began following the recommendations of the Narasimham Committee in 1991, not in 1998. The committee laid the groundwork for reforms in the banking sector aimed at enhancing efficiency and stability.
Conclusion
Based on the analysis:
- Correct Statements: Only Statement 2 is accurate.
- Final Answer: The correct option is B) 1 and 2 Only.

Understanding the Statements
The two statements presented discuss the relationship between monetary policy, price stability, and economic growth.
Statement-I Explained:
- The primary objective of monetary policy is indeed to maintain price stability, which refers to controlling inflation and ensuring stable prices in the economy.
- Additionally, monetary policy considers economic growth, aiming to foster a conducive environment for sustainable economic expansion.
Statement-II Explained:
- Price stability serves as a necessary precondition for sustainable growth. Without stable prices, businesses and consumers face uncertainty, which can hinder investment and spending.
- Stable prices contribute to a predictable economic environment, allowing for better long-term planning and investment decisions.
Why Both Statements are Correct:
- Both statements highlight critical aspects of monetary policy's role in the economy.
- Statement-I outlines the dual focus of monetary policy on price stability and growth.
- Statement-II emphasizes that achieving price stability is essential for fostering sustainable growth, thus providing an explanation for the objectives mentioned in Statement-I.
Conclusion:
- Since both statements are correct and Statement-II provides a rationale for the objectives stated in Statement-I, the correct answer is option 'A': Both Statement-I and Statement-II are correct, and Statement-II explains Statement-I.
This interconnection reinforces the importance of a balanced approach to monetary policy for achieving both stability and growth in the economy.

Analysis of Statements
To determine the correctness of the statements regarding NBFCs, RBI, and monetary policy, let's analyze each one:
1. NBFCs and Their Activities
- Non-Banking Financial Companies (NBFCs) are indeed restricted from engaging in agricultural, industrial, and construction activities as their principal business.
- This regulation is in place to ensure that they focus primarily on financial services like loans and investments.
2. Reserve Bank of India’s Origin
- The Reserve Bank of India (RBI) was established in 1935 under private ownership.
- It was created to respond to economic challenges and provide stability to the Indian currency and financial system before being nationalized in 1949.
3. Objective of Monetary Policy
- The primary objective of India's monetary policy is to maintain price stability while promoting economic growth.
- The RBI aims to control inflation and ensure that growth is sustainable, balancing these two critical aspects of the economy.
Conclusion
All three statements are accurate:
- Statement 1 correctly outlines the restrictions on NBFCs.
- Statement 2 accurately describes the initial establishment of the RBI.
- Statement 3 reflects the dual objectives of the monetary policy in India.
Thus, the correct answer is option 'D', as all statements (1, 2, and 3) are true.