50 Most Repetitive Questions for JAIIB IE and IFS 2026, Download PDF

1. The RBI Governor announces: ‘Despite three consecutive repo rate hikes totalling 150 basis points over the last 9 months, retail lending rates of banks have increased by only 40–50 basis points. This incomplete transmission is a matter of serious concern.’ An economist identifies the following as possible reasons for this weak transmission. Which of the reasons are VALID explanations for weak transmission?

1. Banks have a large proportion of legacy fixed-rate deposits that have not yet repriced upward, keeping their blended cost of funds relatively lower than the marginal rate.
2. The banking system is in a surplus liquidity situation — banks have more funds than needed for lending, so they are less dependent on RBI borrowings at the new higher repo rate.
3. Competition among banks for market share has discouraged individual banks from raising lending rates aggressively, even when their cost of funds rises.
4. Since MCLR is reviewed monthly, all floating rate loans have already reset to the new higher rate within 30 days of the repo hike.
5. Large corporates with high credit ratings have alternative sources of funding (bonds, ECB, CPs) at competitive rates, and banks are unwilling to lose these clients by raising lending rates sharply.

2. RBI is deliberating on the use of the Bank Rate as a monetary policy tool. A policy researcher lists the following facts about the Bank Rate and contrasts it with the Repo Rate. Study the statements and identify which are CORRECTLY stated:

1. The Bank Rate is the rate at which RBI is prepared to buy or rediscount bills of exchange or other commercial paper eligible for purchase — it is governed under Section 49 of the RBI Act, 1934.
2. The Bank Rate is currently aligned with the MSF (Marginal Standing Facility) rate and is used primarily as a penal rate for banks that fail to maintain CRR or SLR requirements.
3. Unlike the Repo Rate (which involves a collateral-backed repurchase agreement), the Bank Rate represents an outright purchase/discount of eligible instruments by RBI — there is no repurchase agreement.
4. The Repo Rate is a more flexible and widely used tool than the Bank Rate because it allows RBI to conduct daily fine-tuning of liquidity through the LAF (Liquidity Adjustment Facility).
5. Both the Bank Rate and Repo Rate are announced during the bi-monthly MPC meetings and are changed simultaneously by the same quantum whenever the MPC revises the policy rate.

3. The Quantity Theory of Money (QTM) is expressed as MV = PT (or MV = PY in modern form). A monetary economist applies this theory to analyse India’s inflation scenario. Given data: Money Supply (M) grows at 12% per year. Velocity of Money (V) is assumed constant. Real GDP (Y) grows at 7% per year. The economist makes the following predictions and statements. Which statements are CORRECT?

1. Based on QTM (MV = PY), inflation should be approximately 5% (12% money growth minus 7% real GDP growth).
2. If RBI reduces money supply growth to 4%, inflation should reduce to approximately -3% (deflation), all else equal.
3. The QTM assumes that the velocity of money is constant and real output is determined by supply-side factors (independent of money supply) — this is known as the ‘Classical Dichotomy.
4. Keynesians challenge QTM by arguing that velocity is NOT constant — it varies with interest rates, expectations, and the state of the economy, making the money-inflation link unstable.
5. In the short run, an increase in money supply may increase REAL output rather than just prices, especially when the economy is operating below potential — a view consistent with QTM in the short run.

4. The ‘Effective Lower Bound’ (ELB) of interest rates has become relevant for many central banks globally. An advanced monetary policy analyst explains this concept and its implications. Evaluate the following statements. Which statements are CORRECT?

1. The Effective Lower Bound (ELB) is approximately 0% (not -∞) because below a certain negative rate, economic agents would prefer holding physical cash (which pays 0% return) rather than bank deposits, limiting how negative rates can go.
2. Some European central banks and the Bank of Japan have successfully implemented Negative Interest Rate Policy (NIRP) — charging commercial banks for excess reserves — but none have gone below -1% as the ELB is typically around -0.5% to -1%.
3. When conventional monetary policy (interest rate cuts) is constrained by the ELB, central banks can use ‘unconventional tools’ such as QE, forward guidance, and yield curve control as substitutes.
4. The concept of ‘Helicopter Money’ — direct monetary transfers to the public — is equivalent to a combination of monetary and fiscal policy and can be effective even when interest rates hit the ELB.
5. India is unlikely to face the ELB problem in the near future because its neutral real interest rate is significantly above zero, giving the RBI ample room to cut rates if needed.

5. RBI has a complex relationship with the government in managing fiscal policy. The ‘Fiscal Dominance’ theory poses a risk to monetary policy independence. An RBI official explains this and related concepts. Which statements are CORRECT?

1. ‘Fiscal Dominance’ occurs when the government’s large borrowing requirements force the central bank to keep interest rates artificially low (to reduce debt servicing costs), even when inflation warrants rate hikes — compromising monetary policy independence.
2. India’s FRBM (Fiscal Responsibility and Budget Management) Act, 2003 was enacted partly to prevent fiscal dominance by limiting government deficits and thereby reducing pressure on RBI to monetise the deficit.
3. ‘Deficit Monetisation’ occurs when RBI directly finances the government’s fiscal deficit by purchasing government bonds at primary auctions — effectively creating new money to fund government spending.
4. Under the present framework, RBI is legally prohibited from participating in primary auctions of government securities and can only buy G-Secs in the secondary market through OMOs.
5. The Ways and Means Advances (WMA) facility — through which RBI provides short-term funds to the government to bridge cash flow mismatches — represents a form of deficit monetisation if not repaid within the stipulated period.

Q6. Which of the following is NOT a function of the Reserve Bank of India?

Q7. The Statutory Liquidity Ratio (SLR) requires banks to maintain a minimum percentage of their NDTL in which of the following forms?

Q8. Which of the following best describes ‘Moral Hazard’ in the context of banking and insurance?

Q9. Which of the following committees recommended the establishment of the Asset Reconstruction Companies (ARCs) in India?

Q10. Under the Insolvency and Bankruptcy Code (IBC), 2016, the maximum time limit for completing the Corporate Insolvency Resolution Process (CIRP) including litigation is:

Q11. The National Electronic Funds Transfer (NEFT) system in India operates:

Q12. Which of the following best describes ‘Participatory Notes (P-Notes)’ in the Indian capital market?

Q13. Which of the following correctly describes a ‘Reverse Mortgage’ product?

Q14. The concept of ‘Priority Sector Lending’ (PSL) in India requires domestic scheduled commercial banks to lend what percentage of ANBC (Adjusted Net Bank Credit) to priority sectors?

Q15. Which of the following is correct regarding the Monetary Policy Committee (MPC) of India?