Which of the following is considered a non-performing asset (NPA) in banking?
(a) A loan that is repaid on time
(b) An overdue loan on with interest or principal for 90 days or more
(c) A loan fully backed by collateral of 100 crores or more
(d) A government bond held by a bank
Correct Answer: (b) A loan on which interest or principal is overdue for 90 days or more
Explanation:
- NPA = loan where interest/principal is overdue for ≥90 days.
- NPAs reduce bank profitability and asset quality.
Q2. Which of the following is/are tools of monetary policy in India?
- Repo rate
- Cash Reserve Ratio (CRR)
- Open Market Operations (OMO)
- Fiscal deficit management
(a) 1 and 2 only
(b) 1, 2 and 3 only
(c) 2 and 4 only
(d) 1, 3 and 4 only
Correct Answer: (b) 1, 2 and 3 only
Explanation:
- Monetary policy = RBI controls money supply/liquidity using repo, reverse repo, CRR, SLR, and OMOs.
- Fiscal deficit management → fiscal policy, not monetary policy.
Q3. Consider the following statements regarding Inflation:
- Demand-pull inflation occurs due to excess demand over supply.
- Cost-push inflation occurs due to increase in production costs.
- Stagflation is a combination of inflation and high unemployment.
Which of the above statements is/are correct?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1, 2 and 3
(d) 1 and 3 only
Correct Answer: (c) 1, 2 and 3
Explanation:
- Demand-pull → excess demand, upward price pressure.
- Cost-push → higher input costs (wages, raw materials).
- Stagflation → inflation + stagnant growth + unemployment.
Q4. Which of the following is true about the Monetary Policy Committee (MPC) of India?
- It determines the policy repo rate.
- It has six members from RBI and three members from the government.
- It was established under the RBI Act, 1934.
(a) 1 and 2 only
(b) 1 and 3 only
(c) 2 and 3 only
(d) 1, 2 and 3
Correct Answer: (a) 1 and 2 only
Explanation:
- MPC → 6 RBI officials + 3 government-nominated members.
- Determines repo rate for inflation targeting.
- Established under Finance Act 2016, not RBI Act 1934.
Q5. Which of the following are components of Gross Domestic Product (GDP) by expenditure method?
- Private consumption
- Government expenditure
- Net exports
- Capital formation
(a) 1, 2 and 3 only
(b) 1, 2, 3 and 4
(c) 2, 3 and 4 only
(d) 1 and 4 only
Correct Answer: (b) 1, 2, 3 and 4
Explanation:
- GDP = C + G + I + (X-M), where C=private consumption, G=government spending, I=investment/capital formation, X-M=net exports.
