Money, banking & monetary policy

Answer: (b) 2 only

'Lender of last resort' describes the RBI's readiness to lend to banks at all times, so that a bank short of cash in a crisis does not collapse and trigger a run. Lending to firms is the job of commercial banks, and lending to governments is part of the RBI's separate role as banker to the government.

• ✗ 1. The RBI does not lend to trade and industry; businesses borrow from banks and markets.
• ✓ 2. When a bank faces a temporary liquidity crisis and cannot raise funds elsewhere, the RBI stands ready to lend to it; this is the lender-of-last-resort role.
• ✗ 3. Short-term advances to the Centre and States come under the RBI's function as banker to the government, not as lender of last resort.

Remember · Lender of last resort = the central bank's promise to supply liquidity to banks in distress, protecting depositors and the financial system.

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Answer: (d) to leave it unchanged

Money supply does not change, because the ₹ 1,00,000 only moves from one part of money supply to another. Demand deposits fall by ₹ 1,00,000 and the currency you hold rises by the same amount.

• ✗ (a) Money supply counts currency held by the public as well as demand deposits. Your deposit falls by ₹ 1,00,000, but your cash in hand rises by ₹ 1,00,000, so the total is unchanged.
• ✗ (c) Cash leaving the bank reduces its reserves, so it cannot start a larger expansion of money. Any later effect would work through banks lending less, not through this withdrawal itself.
• ✓ (d) Narrow money is M1 = currency held by the public + demand deposits. A cash withdrawal only converts one component into the other, so M1 stays the same.

Remember · M1 = currency with the public + demand deposits. Converting a deposit into cash, or the reverse, leaves money supply unchanged.

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Answer: (d) 1, 2 and 3

Non-financial debt is the debt owed by the non-financial sectors of the economy: households, non-financial companies and the government. Housing loans and credit-card dues are household debt, and Treasury bills are short-term borrowing by the government, so all three count.

• ✓ 1. A housing loan is borrowing by a household. Households are part of the non-financial sector, which is split into non-financial corporations and households (BIS classification).
• ✓ 2. Money outstanding on a credit card is a loan to a household, so it is also household debt.
• ✓ 3. Treasury bills are short-term government securities (maturity under one year) issued by the Central Government; they are debt of the government sector, which is counted within the non-financial sector.

Remember · Non-financial debt = borrowings of households, non-financial companies and the government, i.e. everyone except banks and other financial institutions. Loans, credit-card dues and T-bills all count.

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Answer: (b) 2 only

Raising the Marginal Standing Facility (MSF) rate is the one step RBI would not take, because it makes emergency overnight borrowing costlier for banks and so tightens money. An expansionary policy pushes the other way: it cuts reserve requirements such as the SLR and cuts the Bank Rate and repo rate to make credit cheaper.

• ✓ 1. Consistent with an expansionary policy: a lower reserve requirement leaves banks more money to lend, which raises credit and money supply. So RBI would do this.
• ✗ 2. The MSF rate is the penal rate at which banks borrow overnight from RBI against their SLR securities, and the Bank Rate moves with it. Raising it makes borrowing dearer, a tightening step, so RBI would not do this (this is the answer).
• ✓ 3. Consistent with an expansionary policy: NCERT notes that a fall in the bank rate can increase money supply; a lower repo rate likewise makes borrowing from RBI cheaper. So RBI would do this.

Remember · Expansionary policy = cheaper and more plentiful credit: lower SLR, Bank Rate and repo rate. A higher MSF rate (the penal borrowing rate) is a tightening step.

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Answer: (b) 2 only

Only statement 2 is correct: DCCBs are the middle tier of the short-term cooperative credit structure and channel funds to the village-level Primary Agricultural Credit Societies (PACS). Statement 1 fails because commercial banks, not cooperative banks, supply most crop loans.

• ✗ 1. NABARD's analysis of crop loans puts commercial banks at 65.30 per cent and all cooperative banks together at 17.97 per cent in 2019-20, with Regional Rural Banks at 16.73 per cent. DCCBs are only one part of the cooperative share, so they do not out-deliver Scheduled Commercial Banks.
• ✓ 2. The short-term cooperative credit structure runs State Cooperative Banks, then DCCBs at district level, then PACS at village level. PACS are refinanced through DCCBs and State Cooperative Banks, so DCCBs supply them with funds.

Remember · Short-term cooperative credit flows StCB, then DCCB, then PACS (village). Commercial banks, not cooperative banks, supply most short-term (crop) farm credit.

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Answer: (a) 1 and 2 only

The Interest Coverage Ratio (ICR) is a firm's earnings before interest and tax divided by its interest expenses, so a higher ICR means the firm can pay its interest more easily. That makes statement 3 wrong. Banks use ICR to gauge a borrower's current repayment strength and, by tracking it over time, its emerging risk.

• ✓ 1. ICR shows how many times current earnings cover interest due. RBI treats an ICR below unity (below 1) as an indicator of a firm's financial vulnerability, so it shows the borrower's present risk.
• ✓ 2. ICR is worked out period after period. A falling trend warns that repayment strength is eroding before default happens, so it also helps a bank see emerging risk.
• ✗ 3. It is the reverse: a higher ICR means better ability to service debt. RBI describes an improving ICR as a sign of improved debt servicing.

Remember · ICR = EBIT ÷ interest expenses. Higher is safer; below 1 means earnings do not even cover interest.

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Answer: (b) 1, 3 and 4 only

The short-term limit under the Kisan Credit Card covers crop cultivation, post-harvest expenses, produce marketing loans, the consumption needs of the farmer's household and working capital for maintaining farm assets. Buying machinery or building assets such as a cold store is investment credit, which forms the separate long-term portion, so only 1, 3 and 4 are correct.

• ✓ 1. Working capital for maintenance of farm assets and allied activities is one of the listed purposes and is part of the short-term limit.
• ✗ 2. Buying combine harvesters, tractors or mini trucks is investment in assets. The KCC's investment credit forms the long-term limit portion, not the short-term one.
• ✓ 3. Consumption requirements of the farmer household are a listed purpose and count in the short-term limit.
• ✓ 4. Post-harvest expenses are a listed purpose and count in the short-term limit.
• ✗ 5. Building a family house is not among the listed purposes, and setting up a cold storage facility is an investment (long-term) need rather than a short-term one.

Remember · KCC short-term limit: crop cultivation, post-harvest expenses, produce marketing loan, household consumption and farm-asset maintenance. Asset purchases fall under the long-term investment component.

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Answer: (a) 1 and 2 only

Statements 1 and 2 are correct, and 3 is wrong. Food has a far larger weight in CPI (45.86 per cent in the combined index) than in WPI (24.38 per cent), and WPI tracks goods only, so it misses services that CPI includes. The RBI's inflation target is fixed in terms of CPI, not WPI.

• ✓ 1. In CPI (base 2012, combined) food and beverages carry a weight of 45.86 per cent; the WPI Food Index has a weight of 24.38 per cent.
• ✓ 2. WPI covers commodities, and RBI's expert committee noted that it does not capture price movements in services such as those in the CPI basket (housing, health, transport and communication).
• ✗ 3. Under Section 45ZA of the RBI Act the Central Government sets the inflation target in terms of CPI (4 per cent, with a 2 to 6 per cent band, notified in August 2016), and the RBI works to it.

Remember · CPI measures retail prices, has a heavy food weight, includes services and is the RBI's inflation-target anchor. WPI is wholesale prices of goods only, with a lighter food weight.

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Answer: (b) Lead Bank Scheme

The Service Area Approach was part of the Reserve Bank of India's Lead Bank Scheme. Introduced in April 1989, it assigned each rural and semi-urban bank branch a service area of 15 to 25 villages whose credit needs it had to meet.

• ✓ (b) RBI's Master Circular on the Lead Bank Scheme has a section on the Service Area Approach. It applied to all scheduled commercial banks including Regional Rural Banks and aimed to link bank credit with production, productivity and incomes.
• ✗ (a) The Integrated Rural Development Programme was an anti-poverty self-employment programme run by the government. It did not allocate villages to bank branches.
• ✗ (c) MGNREGS is a wage-employment guarantee scheme with no link to bank-branch service areas.
• • Since then RBI reviewed the approach in December 2004 and dropped its restrictive provisions. Banks are now free to lend in any rural or semi-urban area; village allocation applies only to Government-sponsored schemes (RBI Master Circular).

Remember · Service Area Approach (April 1989) sits under RBI's Lead Bank Scheme: one rural branch, 15 to 25 villages. Its village-allocation rule was relaxed in 2004.

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Answer: (b) Deposits

Deposits are not an asset of a bank; they are its liability, because the bank owes that money back to depositors. What a bank holds and earns from, such as loans and advances, investments, and money lent at call and short notice, are its assets.

• ✓ (b) In the prescribed bank balance sheet (Form A, Third Schedule to the Banking Regulation Act, 1949, reproduced by RBI), Deposits appear under Capital and Liabilities. NCERT's model bank balance sheet likewise records deposits as liabilities and loans and reserves as assets.
• ✗ (a) Advances (loans given to borrowers) are the bank's main earning asset and are listed under Assets in Form A.
• ✗ (c) Investments, mainly in government and other securities, are held by the bank and appear on the assets side (Form A lists Investments under Assets).
• ✗ (d) Money at call and short notice is short-term lending to other banks and is an asset; Form A lists 'Balance with banks and money at call and short notice' first among the assets after cash and balances with RBI.

Remember · For a bank, deposits are liabilities (owed to customers); loans and advances, investments, and cash and short-term lending are assets.

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Answer: (b) 1 and 3 only

IT export earnings and remittances from Indians abroad both bring foreign currency into India, which helps pay for imports and supports the rupee, so they lower the risk of a currency crisis. Higher government spending does not earn any foreign exchange and tends to push up demand and prices, so it does not reduce that risk.

• ✓ 1. NCERT notes that India is earning large foreign exchange through the export of information technology. RBI's balance of payments releases likewise credit software services exports for rising services receipts.
• ✓ 3. Private transfer receipts, mainly remittances by Indians employed overseas, are a large steady inflow of foreign currency in the balance of payments (US$ 27.4 billion in July-September 2022).
• ✗ 2. Extra government spending raises aggregate demand and is criticised as inflationary (NCERT). It adds no foreign-currency receipts, so it is not a factor that reduces currency-crisis risk.

Remember · Stable foreign-exchange inflows, such as IT and services exports and remittances, protect the currency; expansionary government spending brings no such inflow.

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Answer: (d) To aim at faster resolution of stressed assets of ₹ 50 crore or more which are under consortium lending

An Inter-Creditor Agreement is a pact among the lenders to one borrower so that they can settle on a resolution plan for a stressed loan together, by majority, instead of each bank holding out separately. That is why UPSC's answer is faster resolution of stressed assets under consortium lending.

• ✓ (d) RBI's framework says lenders to a borrower with facilities from more than one lender must enter into an ICA to set ground rules for finalising and implementing the resolution plan. It binds all lenders once lenders holding 75 per cent by value and 60 per cent by number agree.
• ✗ (a) The ICA is an agreement between lenders about individual stressed accounts. It has nothing to do with the Government's fiscal deficit or current account deficit.
• ✗ (b) It does not fund infrastructure projects; it only sets how lenders decide on a resolution plan for an already stressed loan.
• ✗ (c) An ICA is a contract between lenders, not a regulator. Banks are regulated by the Reserve Bank of India.
• • Since then RBI's Prudential Framework for Resolution of Stressed Assets, dated 7 June 2019, made signing an ICA mandatory for lenders when a resolution plan is to be implemented (RBI; PIB).

Remember · Inter-Creditor Agreement: lenders in a consortium agree to decide a stressed loan's resolution by majority (75 per cent by value and 60 per cent by number), for faster resolution.

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Answer: (a) Banks Board Bureau

In 2019 the Banks Board Bureau (BBB) was the body that recommended the selection of heads of public sector banks. The Government set it up as an autonomous body, functioning from 1 April 2016, to improve governance of public sector banks.

• ✓ (a) The Government's announcement of the Bureau said it would recommend for selection of the heads of public sector banks and financial institutions, and help banks with strategy and capital-raising plans.
• ✗ (b) The Reserve Bank of India regulates and supervises banks; it is not the selecting body for public sector bank heads. Its Deputy Governor was only one ex-officio member of the Bureau.
• ✗ (c) The Ministry of Finance owns the banks, but the Bureau was created as an autonomous body so that selection would not rest with the Ministry alone.
• ✗ (d) A bank's own management does not choose its chairman.
• • Since then On 1 July 2022 the Government revamped the Banks Board Bureau into the Financial Services Institutions Bureau (FSIB), which recommends whole-time directors and non-executive chairpersons for financial services institutions (Department of Financial Services).

Remember · Banks Board Bureau (from 1 April 2016) recommended heads of public sector banks; since July 2022 the Financial Services Institutions Bureau has taken over this role.

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Answer: (d) Following an expansionary monetary policy

An expansionary monetary policy lowers interest rates, which makes holding rupee assets less attractive and tends to push the rupee down further. The other three steps reduce the demand for dollars or bring foreign money in, so they support the rupee.

• ✓ (d) NCERT explains that a rise in interest rates at home often leads to an appreciation of the domestic currency, so a policy of lower rates does the opposite and would not stop the slide.
• ✗ (a) Fewer imports and more exports narrow the trade gap. In September 2018 the Government raised customs duty on 19 non-essential items to narrow the current account deficit.
• ✗ (b) Masala bonds are rupee bonds sold abroad, so they bring foreign money in. In September 2018 the Government exempted from tax the interest paid on masala bonds issued between 17 September 2018 and 31 March 2019, to raise foreign exchange inflows.
• ✗ (c) Easier external commercial borrowing lets Indian firms raise foreign money more freely. The RBI liberalised the ECB and rupee-bond framework in January 2019.

Remember · To stop the rupee sliding, the authorities reduce dollar demand and attract foreign inflows (curb imports, ease ECB, masala bonds); cutting interest rates makes it worse.

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Answer: (a) 1 only

Only statement 1 is correct. The RBI's directive of 6 April 2018 requires payment system providers to keep all payment data in a system located only in India. It says nothing about public-sector ownership, and the audit report goes to the RBI, not to the CAG.

• ✓ 1. The directive says all system providers must ensure that the entire data relating to payment systems operated by them is stored in a system only in India. Only the foreign leg of a transaction may also be stored abroad.
• ✗ 2. The directive is about where data is stored. It does not require the systems to be owned or run by public sector enterprises.
• ✗ 3. Providers had to submit a System Audit Report, prepared by CERT-In empanelled auditors and approved by their Board, to the Reserve Bank by 31 December 2018. It was not to be sent to the CAG.

Remember · RBI's data-localisation directive (6 April 2018): all payment data stored only in India; system audit report by a CERT-In empanelled auditor goes to the RBI.

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Answer: (b) Increase in the banking habit of the population

The money multiplier rises when people keep more of their money as bank deposits rather than as cash, because banks then have more deposits to lend and re-lend. A better banking habit lowers the share of money held as currency, so the multiplier goes up.

• ✓ (b) The multiplier depends on the currency/deposit ratio. When more people use banks, less money stays outside the banking system as cash, so the ratio falls and the multiplier rises.
• ✗ (a) A higher cash reserve ratio leaves banks with less to lend. In NCERT's example a 20 per cent CRR limits credit creation, giving a multiplier of 5; a higher CRR would lower it.
• ✗ (c) SLR is a further requirement to hold reserves in liquid form. It is not part of the cash-reserve multiplier NCERT derives, and raising it would not increase money creation.
• ✗ (d) The multiplier depends on ratios such as the CRR and the currency/deposit ratio, not on how many people live in the country.

Remember · Money multiplier rises when the currency/deposit ratio falls (more banking habit) and falls when the cash reserve ratio rises.

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Answer: (c) The charge to a merchant by a bank for accepting payments from his customers through the bank's debit cards.

The Merchant Discount Rate (MDR) is a fee that flows from the merchant to the bank, charged as a percentage of each card payment the merchant accepts. It is not an incentive or a cashback; the RBI caps it and bars merchants from passing it on to customers.

• ✓ (c) The RBI's December 2017 circular speaks of the MDR 'levied on the merchant' and caps it as a percentage of the transaction value.
• ✗ (a) The money moves the other way: the merchant pays the bank, the bank does not pay the merchant.
• ✗ (b) That describes a cashback to cardholders; the RBI in fact tells banks to ensure merchants do not pass MDR charges on to customers.

Remember · MDR = fee a merchant pays its bank on each card/QR payment, a % of transaction value; RBI caps it (debit-card framework of 6 December 2017) and it cannot be passed to customers.

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Answer: (c) National Payments Corporation of India

The National Payments Corporation of India (NPCI) runs the National Financial Switch (NFS), the shared network that lets a card of one bank work at another bank's ATM. NPCI took over the NFS from the RBI's research institute IDRBT on 14 December 2009.

• ✓ (c) The NFS, operated by NPCI, is the largest network of shared ATMs in India, handling interoperable cash withdrawals, card-to-card transfers and cash deposits.
• ✗ (d) The RBI regulates payment systems and authorised NPCI to operate the NFS ATM network in 2009, but it does not itself run the switch.
• ✗ (a) The Indian Banks' Association is an association of bank managements; together with the RBI it promoted NPCI but it operates no ATM network.

Remember · NPCI (2008, promoted by RBI and IBA, not-for-profit) runs NFS (shared ATM switch), IMPS, UPI, RuPay, AePS, NACH and Bharat BillPay.

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Answer: (a) 1 only

A bank's own capital is the cushion that absorbs losses, for instance when borrowers default, and the capital adequacy ratio measures that capital against the bank's risk-weighted assets. The minimum ratio is not left to each bank: in India the Reserve Bank of India prescribes it, following the Basel norms.

• ✓ 1. Capital adequacy means holding enough own funds, relative to risk-weighted assets, so that losses on loans and other assets can be absorbed without the bank becoming insolvent.
• ✗ 2. The RBI's Basel III Master Circular (2014) requires scheduled commercial banks to keep a minimum total capital of 9% of risk-weighted assets; banks may hold more but cannot set the floor themselves.

Remember · CAR (or CRAR) = capital ÷ risk-weighted assets. RBI sets the minimum at 9% (Basel III asks for 8%); with the 2.5% conservation buffer it is 11.5%.

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Answer: (a) 1 only

Only statement 1 is correct: BHIM is a UPI-based app for direct bank-to-bank transfers. Statement 2 fails because a chip-and-PIN card does not use four factors of authentication; UPI, and so BHIM, uses two.

• ✓ 1. BHIM was launched in December 2016 to enable digital payments using UPI, and it allows direct bank-to-bank transfers from a mobile phone. Because UPI is interoperable, the receiver only needs a UPI-enabled bank account.
• ✗ 2. The official description of UPI says it uses two-factor authentication: the registered mobile phone and the secret UPI PIN. A chip-and-PIN card also works on two things, the card itself and its PIN, so it does not have four factors.

Remember · BHIM is the NPCI's UPI app (launched December 2016). UPI uses two-factor authentication: the registered mobile device plus the UPI PIN.

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Answer: (b) The money which a creditor is under compulsion to accept in settlement of his claims

Legal tender is money that the law says must be accepted in settlement of a debt, so a creditor cannot refuse it. Currency notes and coins issued by the state are legal tender.

• ✓ (b) Notes and coins are legal tender because no citizen can refuse them when settling any transaction. The creditor has to accept them.
• ✗ (c) Cheques and drafts are bank money. Anyone can refuse them as a mode of payment, so demand deposits are not legal tender.
• ✗ (d) Legal tender is defined by the compulsion to accept, not by the metal. Paper currency notes are legal tender too.
• ✗ (a) Nothing in the idea of legal tender concerns paying court fees. It only concerns settling a debt.

Remember · Legal tender = money a creditor cannot refuse (notes and coins). Cheques and other demand deposits are not legal tender.

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Answer: (c) 2 and 3 only

Statements 2 and 3 are correct. Only the Central Government issues treasury bills, and they are issued at a discount to face (par) value and redeemed at par. Statement 1 is wrong because the RBI also manages the public debt of State Governments.

• ✗ 1. Under the RBI Act, the RBI can manage a State's public debt by agreement, and it has done so with State Governments for their State Development Loans (SDLs).
• ✓ 2. The Central Government issues both treasury bills and dated securities, while State Governments issue only dated securities (SDLs), so there are no State treasury bills.
• ✓ 3. T-bills are zero-coupon securities that pay no interest. They are sold below face value and redeemed at face value on maturity, and the difference is the investor's return.

Remember · T-bills: issued only by the Centre, at a discount, redeemed at par (91, 182 and 364 days). States issue only SDLs, which the RBI also manages.

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Answer: (b) 3 – 2 – 1 – 4

The order is Air India (1953), State Bank of India (July 1955), the Kerala communist government (1957) and Goa (December 1961), so the sequence is 3-2-1-4. Fixing the years of these four landmarks of the 1950s and early 1960s settles the question.

• • 3. Air India was created under the Air Corporations Act, 1953, when the government nationalised air transport. This is the earliest event.
• • 2. The Imperial Bank of India passed into state ownership and became the State Bank of India in July 1955.
• • 1. In the March 1957 elections in Kerala the Communist Party won the most seats, and E. M. S. Namboodiripad formed a ministry. It was the first communist government to come to power through elections.
• • 4. Goa, Diu and Daman were liberated by the Indian army in December 1961, the last of the four events.

Remember · Order: Air India nationalised 1953, Imperial Bank to SBI 1955, Kerala's communist ministry 1957, Goa's liberation 1961.

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Answer: (b) 2 only

Statement 2 is correct: SBI absorbed its five associate banks and Bharatiya Mahila Bank in 2017. Statement 1 is wrong because the Government's yearly capital infusion into public sector banks (PSBs) went up and down rather than rising steadily.

• ✗ 1. The CAG's audit records infusions of ₹1,900 crore (2008-09), ₹1,200 crore (2009-10), ₹20,117 crore (2010-11), ₹12,000 crore, ₹12,517 crore, ₹14,000 crore, ₹6,990 crore (2014-15), then ₹25,000 crore in each of 2015-16 and 2016-17. The dips in between mean it was not a steady increase; the jump to ₹88,139 crore came only in 2017-18.
• ✓ 2. With Government sanction and in consultation with the RBI, State Bank of India took over State Bank of Bikaner & Jaipur, Hyderabad, Mysore, Patiala and Travancore, plus Bharatiya Mahila Bank. The merger took effect on 1 April 2017.

Remember · SBI merged its five associate banks and Bharatiya Mahila Bank on 1 April 2017; recapitalisation of PSBs was uneven year to year before the 2017-18 surge.

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Answer: (a) 1 only

The MPC, set up under Section 45ZB of the amended RBI Act, 1934, fixes the policy repo rate needed to meet the inflation target. It has six members, is chaired by the RBI Governor, and its external members serve four-year terms, so only statement 1 is right.

• ✓ 1. The MPC determines the policy repo rate, the RBI's benchmark rate; the first MPC was constituted on 29 September 2016.
• ✗ 2. It has six members, not twelve: three from the RBI (the Governor, the Deputy Governor in charge of monetary policy and one officer nominated by the central board) and three appointed by the Central Government for four years.
• ✗ 3. The RBI Governor is its chairperson ex officio. The Finance Minister is not a member; the government's role is to set the inflation target and appoint the external members.

Remember · MPC: six members (3 RBI + 3 government-appointed for 4 years), chaired by the RBI Governor, sets the repo rate; Governor has a casting vote in a tie.

Question and answer: UPSC's official GS Paper I (2017, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). Permalink · Report an error

Answer: (a) 1 and 2 only

The RBI set up Small Finance Banks to further financial inclusion: to give people safe savings options and to supply credit to small business units, small and marginal farmers, micro and small industries and other unorganised-sector entities. Encouraging young entrepreneurs in rural areas is not among the stated objectives.

• ✓ 1. Credit to small business units is named in the RBI's 2014 licensing guidelines as an objective of SFBs.
• ✓ 2. Credit to small and marginal farmers is named in the same objective.
• ✗ 3. The guidelines list savings vehicles and credit to small businesses, farmers, micro and small industries and unorganised-sector entities. Promoting young rural entrepreneurs is not a listed objective.

Remember · SFBs (RBI licensing guidelines, 27 November 2014): financial inclusion through savings vehicles and credit to small businesses, small and marginal farmers, micro and small industries, and the unorganised sector.

Question and answer: UPSC's official GS Paper I (2017, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). Permalink · Report an error

Answer: (a) Mobile wallets will not be necessary for online payments.

UPI moves money straight from one bank account to another through a single mobile app, so users need not first load money into a mobile wallet. That makes 'wallets will not be necessary' the most likely consequence; the other three options are sweeping claims that UPI does not directly cause.

• ✓ (a) UPI links bank accounts to a phone app and transfers money instantly, round the clock. NCERT notes that such mediums directly transfer money from one person's bank account into another, so a separate wallet is not needed.
• ✗ (b) UPI is a way of moving money between bank accounts, not a new currency. Nothing about it points to physical currency being totally replaced within two decades.
• ✗ (c) FDI depends on investment policy, markets and regulation. A domestic payment system does not make foreign investment rise drastically.
• ✗ (d) Subsidy transfers depend on a beneficiary's bank account being identified and linked to the scheme. UPI is a payment channel and does not by itself make them very effective.

Remember · UPI (NPCI, launched 2016) connects bank accounts to one mobile app for instant 24x7 transfers, so a mobile wallet becomes unnecessary.

📘 Read it in NCERT: Class 7 Exploring Society: India and Beyond (Part 1), Ch 11 (practise this chapter)

Question and answer: UPSC's official GS Paper I (2017, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). Permalink · Report an error

Answer: (b) It is a scheme of RBI for reworking the financial structure of big corporate entities facing genuine difficulties.

S4A was a scheme of the Reserve Bank of India that gave banks a way to rework the financial structure of entities in genuine difficulty that needed deep, co-ordinated restructuring of their debt.

• ✓ (b) The RBI describes S4A as an avenue for reworking the financial structure of entities facing genuine difficulties and needing co-ordinated deep financial restructuring, which may involve material write-down of debt.
• ✗ (d) S4A was put in place by the Reserve Bank as its own scheme for banks. It is not a provision of the Insolvency and Bankruptcy Code, which is a separate law.
• ✗ (a) S4A is a banking tool for stressed loans and has nothing to do with the ecological costs of government projects; option (c), disinvestment of PSUs, is also unrelated.
• • Since then In the exam year the scheme was live. On 12 February 2018 the RBI's revised framework withdrew S4A, along with several other restructuring schemes, with immediate effect.

Remember · S4A (RBI): a scheme to rework the debt of stressed companies facing genuine difficulty. Withdrawn by the RBI on 12 February 2018.

Question and answer: UPSC's official GS Paper I (2017, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). Permalink · Report an error

Answer: (c) Both 1 and 2

Both statements are correct. NPCI is the umbrella body for retail payment systems set up with the Reserve Bank's encouragement, and RuPay is its domestic card scheme, whose debit card is issued to Jan Dhan account holders as part of the drive for financial inclusion.

• ✓ 1. NPCI operates the country's retail payment systems, and its RuPay debit card is what beneficiaries of the Pradhan Mantri Jan Dhan Yojana, the national financial inclusion mission, receive with their accounts. Through this card NPCI is tied into the drive for financial inclusion.
• ✓ 2. RuPay is India's own domestic card scheme, launched in March 2012 with NPCI as the body responsible for it.

Remember · NPCI: the RBI-encouraged umbrella body for retail payments (functional 2009). Its RuPay card scheme (launched 2012) is also the debit card issued under Jan Dhan.

Question and answer: UPSC's official GS Paper I (2017, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 1 Oct 2026 (how we verify). Permalink · Report an error

Answer: (b) 1 and 3 only

RBI's licensing guidelines of 27 November 2014 made payments banks narrow banks: they take small deposits and offer payment and remittance services, but they may not lend. Resident-owned mobile telephone companies and supermarket chains were expressly named as eligible promoters, and only ATM/debit cards, not credit cards, are allowed.

• ✓ 1. The guidelines list mobile telephone companies and super-market chains, among others, as eligible promoters provided they are owned and controlled by residents.
• ✗ 2. A payments bank may issue ATM/debit cards, but the guidelines state plainly that it cannot issue credit cards, because a credit card is a form of lending.
• ✓ 3. The guidelines bar lending altogether; apart from CRR, at least 75 per cent of demand deposit balances must be invested in government securities or treasury bills.

Remember · Payments bank: deposits (small), remittances, debit/ATM cards, no credit cards, no loans. Promoters can be telcos, supermarket chains, PPI issuers and others owned by residents.

Question and answer: UPSC's official GS Paper I (2016, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). Permalink · Report an error