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Banking and Financial System

6 UPSC Prelims MCQs tagged "Banking and Financial System". Free practice with answer keys, explanations, and timed mock tests on Anantam IAS.

Agriculture and Allied Activities 56 Money, Banking and Monetary Policy 43 Environmental Pollution 43 Biotechnology 37 Parliament 33 Climate Change 32 Finance and Financial Markets 29 Emerging Technologies 28 Trade and External Sector 26 Life Sciences 26 Core Concepts and Foundational Science 20 Public Finance in India 19 International Environmental Framework 18 Continents 18 Religions in India 18 Fundamental Rights 18 Concept and Salient Features of the Constitution 17 Indian Biodiversity - Fauna 17 Renewable Energy 16 Major Physical Divisions of India 16 Multilateral Groupings 16 International Institutions 15 Art and Architecture 15 Drainage System 15 Institutional Measures for Environment Conservation 14 Regional Groupings 14 Rivers and Drainage 14 Infrastructure and Investment Models in India 14 Atmosphere 13 Space Technology 13

  1. Which of the following statements about Crowdfunding is/are correct?

    Which of the following statements about Crowdfunding is/are correct?

    1. Crowdfunding is solicitation of funds (small amount) from multiple investors through a web-based platform or social networking site for a specific project.


    2. Small and Medium Enterprises (SMEs) are able to raise funds at lower cost of capital without undergoing rigorous procedures.

    Select the answer using the code given below:

    1. A1 only
    2. B2 only
    3. CBoth 1 and 2
    4. DNeither 1 nor 2
    Answer and explanation

    Correct answer: C

    Crowdfunding pools small contributions from a large number of investors via web-based platforms or social networks to fund a specific venture or project (1 correct) — SEBI's 2014 consultation paper uses exactly this definition. For SMEs it offers an alternative to bank credit and IPOs, lowering the cost of capital and avoiding rigorous listing and collateral procedures (2 correct). Both statements are valid descriptions of the model.

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    Indian Economy UPSC 2026 Easy

  2. Consider the following statements about the Non-Banking Financial Companies (NBFCs) in India:

    Consider the following statements about the Non-Banking Financial Companies (NBFCs) in India:

    1. NBFCs cannot accept demand deposits.


    2. All the NBFCs operating in India have to be registered with the RBI.


    3. NBFCs form part of the payment and settlement system and can issue cheque drawn on itself.


    4. Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation (DICGC) is not available to the depositors of deposit taking NBFCs.

    Which of the statements given above is/are correct?

    1. A1 and 4
    2. B1, 2 and 3
    3. C4 only
    4. D2, 3 and 4
    Answer and explanation

    Correct answer: A

    NBFCs cannot accept demand deposits (1 correct) and DICGC deposit insurance does not cover NBFC depositors — only scheduled commercial, cooperative and RRB depositors are covered (4 correct). Statement 2 is wrong: certain NBFCs are exempt from RBI registration (housing finance companies regulated by NHB/RBI separately, merchant banking NBFCs regulated by SEBI, insurance NBFCs by IRDAI, etc.). Statement 3 is wrong: NBFCs are not part of the payment-and-settlement system and cannot issue cheques drawn on themselves. Hence only 1 and 4.

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    Indian Economy UPSC 2026 Hard

  3. Consider the following statements about Multidimensional Poverty Index (MPI):

    Consider the following statements about Multidimensional Poverty Index (MPI):

    1. MPI is calculated using Alkire-Foster methodology.


    2. MPI calculated by NITI Aayog has a total of twelve indicators.


    3. Maternal Health and Bank Account are common indicators in the MPI of NITI Aayog and MPI of United Nations Development Programme (UNDP).

    Which of the statements given above is/are correct?

    1. A1 and 2 only
    2. B1, 2 and 3
    3. C1 and 3 only
    4. D2 only
    Answer and explanation

    Correct answer: A

    NITI Aayog's National MPI uses the Alkire-Foster (OPHI) methodology (1 correct). India's MPI adds Maternal Health and Bank Account to UNDP's 10 indicators, taking the total to 12 across the same 3 dimensions of health, education and standard of living (2 correct). Statement 3 is wrong because Maternal Health and Bank Account are India-specific additions, not common with UNDP's global MPI — UNDP's MPI has only 10 indicators and does not include either. Hence 1 and 2 only. Read more: Multidimensional Poverty Index (MPI): Alkire-Foster Method, NITI Aayog MPI, and India’s Progress.

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    Indian Economy UPSC 2026 Medium

  4. Which one of the following correctly represents the three key sub-indices of the Financial Inclusion Index (FI-Index) of the Reserve Bank of India (RBI)?

    Which one of the following correctly represents the three key sub-indices of the Financial Inclusion Index (FI-Index) of the Reserve Bank of India (RBI)?

    1. ACredit access, Insurance depth, and Pension coverage
    2. BBanking access, GDP contribution, and Financial literacy
    3. CAccess, Usage, and Quality
    4. DAccess, Affordability, and Transparency
    Answer and explanation

    Correct answer: C

    The RBI's Financial Inclusion Index, first published in 2021, is a composite index built on three sub-indices: Access (weight 35%), Usage (45%) and Quality (20%). It captures banking, investments, insurance, postal and pension across these dimensions, with the Quality sub-index including financial literacy and consumer protection. Other combinations listed (credit/insurance/pension or affordability/transparency) are distractors and do not match the RBI's official FI-Index architecture.

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    Indian Economy UPSC 2026 Easy

  5. Which one of the following statements about Unified Payments Interface (UPI) and Central Bank Digital Currency (Digital Rupee) is not correct?

    Which one of the following statements about Unified Payments Interface (UPI) and Central Bank Digital Currency (Digital Rupee) is not correct?

    1. AUPI is a real-time payment system but Digital Rupee is akin to sovereign paper currency.
    2. BIn case of UPI, settlement for end users happens instantly as the money gets immediately debited or credited but in case of Digital Rupee, there is no settlement as the wallet balance gets transferred to another wallet.
    3. CUPI transactions are recorded by banks and reflected in bank statements but in case of Digital Rupee, no data is captured in bank statements as transactions are from one wallet to another.
    4. DIn both the cases (UPI and Digital Rupee), the liability lies with the users and their respective banks.
    Answer and explanation

    Correct answer: D

    In UPI the liability and settlement risk lie with banks (and the user's bank account), while the Digital Rupee (e-Rupee) is a direct liability of the Reserve Bank of India — sovereign money held in a wallet, not a bank deposit. So statement (d) is wrong because the liability does not lie with users/banks in the case of the Digital Rupee. Statements (a), (b) and (c) correctly distinguish UPI's bank-mediated, account-settled transactions from CBDC's wallet-to-wallet token transfers.

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    Science & Tech UPSC 2026 Easy

  6. Which one of the following statements about the Eka Movement and Bardoli Satyagraha is correct?

    Which one of the following statements about the Eka Movement and Bardoli Satyagraha is correct?

    1. AThe Eka Movement was throughout supported and organized by the Congress while Bardoli Satyagraha was initially independent of Congress influence and was only in the last stages supported by the Congress.
    2. BThe Eka Movement was provided leadership by the taluqdars of Awadh, whereas the Bardoli Satyagraha was a movement of the landless labourers.
    3. CThe Bardoli Satyagraha was a campaign against the enhancement of land revenue, while the Eka Movement was a protest against excessive extraction of rents.
    4. DThe Eka Movement was located in the Varanasi and Mirzapur districts of the present-day U.P., while the Bardoli Satyagraha took place in Saurashtra.
    Answer and explanation

    Correct answer: C

    The Eka (Unity) Movement of 1921–22 in Hardoi, Bahraich, Sitapur and Barabanki districts of Awadh (not Varanasi/Mirzapur) was a peasant agitation, led initially by Madari Pasi, against excessive rent extraction (rents 50% above recorded rates), forced labour and share-rents. The Bardoli Satyagraha (1928) in Surat district under Vallabhbhai Patel was a no-tax campaign against a 22% (later 30%) enhancement of land revenue. Option (c) captures this contrast accurately. Source: Bipan Chandra, India's Struggle for Independence.

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    History UPSC 2026 Easy