Money, banking & monetary policy

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