Class 10 Banking in India Mock Test (ICSE)

Topics in Banking in India

• Money: functions and evolution
• Commercial banks: functions and credit creation
• Central bank: functions of the RBI
• Monetary policy instruments
• Demonetisation
• Public finance: public revenue and public expenditure

Banking in India practice questions with answers

1. Q1Multiple choice·1 mark
   The main difficulty faced in the barter system, which led to the evolution of money, was:

   1. (a)Presence of central banking
   2. (b)Lack of double coincidence of wants
   3. (c)Too much government control
   4. (d)Excess supply of goods
   Show answer and step marks

   1. Correct option: (b) Lack of double coincidence of wants+1

   Answer: (b)
2. Q2Multiple choice·1 mark
   Which of the following is an example of non-tax public revenue for the government?

   1. (a)Income tax
   2. (b)Fees and fines
   3. (c)Customs duty
   4. (d)Goods and Services Tax (GST)
   Show answer and step marks

   1. Correct option: (b) Fees and fines+1

   Answer: (b)
3. Q3Multiple choice·1 mark
   Which of the following is a quantitative credit control instrument used by the Central Bank?

   1. (a)Direct action
   2. (b)Margin requirements
   3. (c)Moral suasion
   4. (d)Open Market Operations
   Show answer and step marks

   1. Correct option: (d) Open Market Operations+1

   Answer: (d)
4. Q4Multiple choice·1 mark
   What was the primary objective of the demonetisation of high-denomination currency notes announced in India in November 2016?

   1. (a)To increase the rate of inflation
   2. (b)To promote physical cash transactions
   3. (c)To curb black money and corruption
   4. (d)To decrease the printing of coins
   Show answer and step marks

   1. Correct option: (c) To curb black money and corruption+1

   Answer: (c)
5. Q5Long answer·4 marks
   Explain the role of the Reserve Bank of India (RBI) under the following functions: (a) Currency Authority (Issuer of currency notes) (b) Lender of Last Resort
   Show answer and step marks

   1. (a) The RBI has the sole right (monopoly) to issue currency notes in India.+1
   2. (a) This ensures uniformity and public confidence in the currency; the exception is that one-rupee notes and all coins are issued by the Government of India (Ministry of Finance), and the RBI only puts them into circulation.+1
   3. (b) Lender of last resort: when commercial banks face a severe financial crisis or shortage of funds and cannot get money from any other source, they turn to the RBI.+1
   4. (b) The RBI then provides them emergency financial help (loans against eligible securities or rediscounting bills), preventing bank failures and protecting depositors.+1

   Answer: (a) The RBI alone issues currency notes, ensuring a uniform, trusted currency; one-rupee notes and all coins are issued by the Government of India (Ministry of Finance). (b) As lender of last resort, the RBI gives emergency financial help to commercial banks that cannot get funds elsewhere, preventing bank failures and protecting depositors.

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