Q1. Which of the following is the apex regulatory authority for the securities market in India?
(a) Reserve Bank of India (RBI)
(b) Securities and Exchange Board of India (SEBI)
(c) Insurance Regulatory and Development Authority (IRDAI)
(d) Pension Fund Regulatory and Development Authority (PFRDA)
Answer: (b)
Explanation: SEBI regulates the securities market, protects investors, and promotes development of the securities market in India.
Q2. The Public Financial Management System (PFMS) is primarily used for:
(a) Issuing government securities
(b) Monitoring real‑time flow of funds for government schemes
(c) Conducting monetary policy operations
(d) Regulating non‑banking financial companies
Answer: (b)
Explanation: PFMS is a web‑based online software application for tracking funds released under various Central and State government schemes and ensuring their proper utilization.
Q3. Which committee recommended the introduction of the Goods and Services Tax (GST) in India?
(a) Kelkar Committee
(b) Vijay Kelkar Committee
(c) Raja Chelliah Committee
(d) Urjit Patel Committee
Answer: (b)
Explanation: The Vijay Kelkar Committee (2003) recommended a comprehensive indirect tax reform leading to the implementation of GST.
Q4. The Consolidated Fund of India comprises:
(a) Revenues received by the Government of India and loans raised by it
(b) Only tax revenues of the central government
(c) Contingency fund and public account balances
(d) Grants-in-aid received from foreign countries
Answer: (a)
Explanation: Article 266(1) of the Constitution states that the Consolidated Fund includes all revenues received by the Government of India, all loans raised by it, and all moneys received in repayment of loans.
Q5. Which of the following is NOT a component of the Indian financial system?
(a) Financial institutions
(b) Financial markets
(c) Financial instruments
(d) Fiscal deficit
Answer: (d)
Explanation: Fiscal deficit is a macro‑economic indicator, not a structural component of the financial system, which consists of institutions, markets, and instruments.
Q6. The Reserve Bank of India acts as the ‘banker to the government’ by:
(a) Issuing currency notes on behalf of the government
(b) Managing the government’s accounts and facilitating receipts and payments
(c) Setting the GST rates
(d) Auditing government expenditures
Answer: (b)
Explanation: As per the RBI Act, 1934, the RBI maintains the accounts of the Central and State governments and carries out their banking transactions.
Q7. Which institution provides long‑term finance to infrastructure projects in India?
(a) National Bank for Agriculture and Rural Development (NABARD)
(b) Industrial Development Bank of India (IDBI)
(c) India Infrastructure Finance Company Limited (IIFCL)
(d) Small Industries Development Bank of India (SIDBI)
Answer: (c)
Explanation: IIFCL was set up to provide long‑term financing to viable infrastructure projects through the Scheme for Financing Viable Infrastructure Projects (SFVIP).
Q8. The term ‘revenue deficit’ refers to:
(a) Total expenditure exceeding total receipts
(b) Capital expenditure exceeding capital receipts
(c) Revenue expenditure exceeding revenue receipts
(d) Fiscal deficit minus interest payments
Answer: (c)
Explanation: Revenue deficit = Revenue expenditure – Revenue receipts. It indicates the government’s inability to meet its regular expenditure from regular income.
Q9. Which of the following is a feature of the Indian money market?
(a) Deals in long‑term securities
(b) Instruments have maturity of more than one year
(c) Includes Treasury bills, commercial paper, and call money
(d) Regulated exclusively by SEBI
Answer: (c)
Explanation: The money market deals with short‑term debt instruments (maturity ≤ 1 year) such as Treasury bills, commercial paper, certificates of deposit, and call/notice money.
Q10. The Fiscal Responsibility and Budget Management (FRBM) Act, 2003 aims to:
(a) Eliminate all subsidies
(b) Ensure fiscal discipline by limiting fiscal and revenue deficits
(c) Increase government borrowing without limits
(d) Privatize all public sector enterprises
Answer: (b)
Explanation: The FRBM Act mandates progressive reduction of fiscal deficit and revenue deficit to achieve macro‑economic stability.
Q11. Which of the following statements about the Contingency Fund of India is correct?
(a) It is operated by the Ministry of Finance without parliamentary approval
(b) It is held by the President of India to meet unforeseen expenditure
(c) Its corpus is ₹500 crore and cannot be increased
(d) It forms part of the Consolidated Fund of India
Answer: (b)
Explanation: Article 267(1) provides for a Contingency Fund held by the President to meet urgent, unforeseen expenditure pending parliamentary authorization.
Q12. The ‘Lead Bank Scheme’ was introduced to:
(a) Provide microfinance to urban poor
(b) Assign responsibility for banking development in a district to a specific bank
(c) Regulate foreign exchange rates
(d) Manage the government’s securities portfolio
Answer: (b)
Explanation: Initiated in 1969, the Lead Bank Scheme designates one bank as the lead bank for each district to coordinate banking development and credit flow.
Q13. Which of the following is a quasi‑fiscal activity?
(a) Payment of interest on government bonds
(b) Provision of subsidies through the budget
(c) Directed lending by banks to priority sectors at concessional rates
(d) Collection of customs duties
Answer: (c)
Explanation: Quasi‑fiscal activities are those performed by central banks or other entities that have fiscal implications but are not part of the budget, e.g., directed credit at below‑market rates.
Q14. The ‘Marginal Standing Facility (MSF)’ allows banks to:
(a) Borrow from RBI against government securities at a rate higher than the repo rate
(b) Deposit excess surplus funds with RBI
(c) Issue commercial paper
(d) Invest in long‑term infrastructure bonds
Answer: (b) is incorrect; correct answer: (a)
Explanation: Under MSF, scheduled banks can borrow overnight funds from RBI against approved government securities at a rate (repo rate + 3 %) to manage liquidity shortages.
Q15. Which committee recommended the setting up of the National Financial Reporting Authority (NFRA)?
(a) Kelkar Committee
(b) N.R. Narayana Murthy Committee
(c) Y.H. Malegam Committee
(d) Uday Kotak Committee
Answer: (c)
Explanation: The Y.H. Malegam Committee (2009) recommended the creation of NFRA as an independent regulator for auditing and accounting standards.
Q16. In the context of government accounting, the term ‘deposit’ refers to:
(a) Money received by the government that is to be repaid
(b) Tax revenue collected
(c) Capital expenditure incurred
(d) Grants-in-aid given to states
Answer: (a)
Explanation: Deposits are amounts received by the government that are repayable, such as security deposits, earnest money, or provident fund contributions.
Q17. Which of the following instruments is issued by the RBI to manage short‑term liquidity?
(a) Treasury Bills
(b) Certificates of Deposit
(c) Repo and Reverse Repo operations
(d) Sovereign Gold Bonds
Answer: (c)
Explanation: RBI conducts repo (lending) and reverse repo (borrowing) operations with banks to inject or absorb liquidity in the short term.
Q18. The ‘Capital Budget’ of the government includes:
(a) Revenue receipts and revenue expenditure
(b) Capital receipts and capital expenditure
(c) Only tax receipts
(d) Only interest payments
Answer: (b)
Explanation: The Capital Account deals with capital receipts (like loans, disinvestment) and capital expenditure (like acquisition of assets, infrastructure spending).
Q19. Which of the following statements about the Securities Transaction Tax (STT) is true?
(a) It is levied on both purchase and sale of equity shares
(b) It is a direct tax levied on corporate profits
(c) It is collected by the RBI
(d) It applies only to mutual fund transactions
Answer: (a)
Explanation: STT is a turnover tax levied on the value of taxable securities transactions (purchase and sale) executed on recognized stock exchanges.
Q20. The ‘Financial Stability and Development Council (FSDC)’ is chaired by:
(a) Governor, RBI
(b) Finance Minister, Government of India
(c) Secretary, Ministry of Corporate Affairs
(d) Chairman, SEBI
Answer: (b)
Explanation: The FSDC, set up in 2010, is chaired by the Finance Minister and includes heads of financial regulators to strengthen macro‑prudential supervision.
Q21. Which of the following is NOT a source of non‑tax revenue for the central government?
(a) Dividends from public sector undertakings
(b) Interest receipts on loans given to states
(c) Customs duties
(d) Fees and user charges
Answer: (c)
Explanation: Customs duty is a tax on imports/exports and thus falls under tax revenue; the others are non‑tax revenue sources.
Q22. The ‘Way and Means Advances (WMA)’ scheme provides:
(a) Long‑term loans to state governments
(b) Temporary advances to the government to meet mismatches in receipts and payments
(c) Equity investment in public sector banks
(d) Subsidy for agricultural inputs
Answer: (b)
Explanation: WMA is a temporary credit facility extended by RBI to the central and state governments to tide over temporary mismatches in cash flow.
Q23. Which of the following best describes ‘fiscal consolidation’?
(a) Increasing government borrowing to stimulate growth
(b) Reducing fiscal deficit through expenditure control and revenue enhancement
(c) Expanding the money supply to lower interest rates
(d) Privatizing all government assets
Answer: (b)
Explanation: Fiscal consolidation refers to policies aimed at reducing fiscal deficits and debt levels to achieve sustainable public finances.
Q24. The ‘Gross Fiscal Deficit (GFD)’ is defined as:
(a) Total expenditure minus total receipts (excluding borrowings)
(b) Revenue expenditure minus revenue receipts
(c) Capital expenditure minus capital receipts
(d) Total receipts minus total expenditure
Answer: (a)
Explanation: GFD = Total expenditure – (Revenue receipts + Non‑debt capital receipts). It indicates the total borrowing requirements of the government.
Q25. Which of the following is a key feature of the ‘Public Financial Management System (PFMS)’?
(a) It replaces the need for budget formulation
(b) It provides real‑time tracking of fund utilization for government schemes
(c) It regulates the stock exchanges
(d) It fixes the interest rates on government securities
Answer: (b)
Explanation: PFMS enables monitoring of fund flow from release to final expenditure, enhancing transparency and accountability in the implementation of government schemes.
