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FAQs on PPT: Banking Sector - Indian Economy for UPSC CSE

1. What is the role of the banking sector in the economy?
Ans. The banking sector plays a crucial role in the economy by providing financial services, such as accepting deposits, granting loans, and facilitating transactions. It mobilizes savings from individuals and businesses and channels them towards investments and economic activities, contributing to economic growth.
2. How are banks regulated in the banking sector?
Ans. Banks are regulated in the banking sector through various measures. Government regulatory bodies, such as central banks and financial authorities, enforce regulations and monitor the activities of banks to ensure their stability and compliance with laws. This includes setting capital requirements, conducting regular audits, and supervising the overall functioning of banks.
3. What are the different types of banks in the banking sector?
Ans. The banking sector consists of various types of banks, including commercial banks, investment banks, central banks, and cooperative banks. Commercial banks primarily deal with deposits and lending to individuals and businesses, while investment banks focus on providing financial services to corporations and governments. Central banks are responsible for monetary policy and regulating the banking system, while cooperative banks are owned and operated by their members.
4. How do banks assess creditworthiness before granting loans?
Ans. Banks assess creditworthiness before granting loans by analyzing various factors. This includes evaluating the borrower's credit history, income stability, debt-to-income ratio, and collateral (if applicable). They may also consider the purpose of the loan and the borrower's financial standing. This assessment helps banks determine the level of risk associated with the loan and make informed decisions on whether to approve or reject the loan application.
5. How do banks ensure the security of customer's funds in the banking sector?
Ans. Banks employ various security measures to ensure the safety of customer funds in the banking sector. This includes implementing secure online banking platforms and using encryption technology to protect customer data and transactions. Banks also have insurance coverage, such as deposit insurance schemes, to safeguard customer funds in case of bank failures. Additionally, banks have robust internal control systems and carry out regular audits to detect and prevent fraudulent activities and unauthorized access to customer accounts.
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