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IFS Most asked Important Question from Paper Questions:

 (First 4 chapters only, Last chapter recently added not in QP)

☻ Chapter 1
☺ Sec A
1. What is Money market? **2021, 2018
2. Give any two examples of instruments that are traded in money market. **2021
3. Name the components of Financial System. **2019
4. What is Capital market? **2019, 2015
5. What is a financial system? **2018
6. What is Financial Institution? **2017, 2015
7. What is Primary Market?** 2017
8. Give the meaning of Open Market. **2017
9. Give the meaning of financial asset. **2016
10. What are the marketable securities? Give any two examples. **2016
Ans: Marketable securities are securities that can easily be sold. On a corporation's balance
sheet, they are assets that can be readily converted into cash - for example, government
securities, banker's acceptances and commercial paper.
11. What is a money market? **2014
12. Classify the financial assets with examples. **2014
Ans: Cash, stocks, bonds, mutual funds, and bank deposits are all are examples of financial
assets. Unlike land, property, commodities, or other tangible physical assets, financial assets do
not necessarily have inherent physical worth or even a physical form.

☺ Sec B
1. State the functions of Capital Market. **2021
2. Distinguish between money market and capital market. ***2019, 2016
3. Write a note on NSE. **2019
Ans: National Stock Exchange of India Limited is the leading stock exchange of India
 It is located in Mumbai, Maharashtra.
 The National Stock Exchange of India Limited (NSE) is India's largest financial market
and the fourth largest market by trading volume.
 The National Stock Exchange of India Limited was the first exchange in India to provide
modern, fully automated electronic trading.
 It is world’s largest derivatives exchange in 2021 by number of contracts traded based on
the statistics maintained by Futures Industry Association, a derivatives trade body.
 To establish a trading facility for debt, equity, and other asset classes accessible to
investors across the nation.
 To act as a communication network providing investors an equal opportunity to
participate in the trading system.
 To meet the global standards set for financial exchange markets.

4. Briefly explain the functions of Financial Markets. **2018

5. What are the features of financial services? **2018
6. State the role of financial markets. **2017
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7. Distinguish between Primary market and Secondary market. **2017

8. Briefly explain any six functions of financial system. **2016
9. Explain the features of Money Market. **2015
☺ Sec C
1. Discuss the role and functions of Financial Market. **2021
2. What is financial system discuss the various components of financial system. *** 2019, 2016
3. What is Capital market? Discuss their objectives and importance. **2019
4. What is Capital market? Distinguish between the capital market and the money market. **2018,
2017
5. What is secondary market? Explain its functions. **2015
6. Discuss the role and functions of Financial Markets. **2014

☻ Chapter 2
☺ Sec A
1. What is ATM? ** 2021
Ans: Automated teller machine, it is a computerized electronic machine that performs basic
banking functions (such as handling check deposits or issuing cash withdrawals) — called also
automated teller machine, automatic teller, automatic teller machine.
2. What is SLR? **2021
Ans: Statutory liquidity ratio (SLR) refers to the minimum reserve requirement that needs to be
maintained by commercial banks in the nation. This term is used by the Indian government. The
current SLR ratio is 18%.
3. Who is Indigenous Banker? **2021
Ans: Indigenous bankers are private firms or individuals who operate as banks and as such both
receive deposits and give loans. Like banks, they are also financial intermediaries. They should
be distinguished h professional moneylenders whose primary business is not banking but money
lending.
4. Define Bank. **2019
5. What is Bank Rate? **2019
Ans: A bank rate is the interest rate a nation's central bank charges to its domestic banks to
borrow money. The rates central banks charge are set to stabilize the economy.
6. Expand ICICI. ** 2019
7. Define a Foreign Bank. **2018
8. Define Nonperforming Assets / NPA. **2021, 2018, 2014
Ans: A non-performing asset (NPA) is a loan or advance for which the principal or interest
payment remained overdue for a period of 90 days. Banks are required to classify NPAs further
into Substandard, Doubtful and Loss assets.
9. What is Overdraft? **2017
10. What is Credit Control? **2017
11. State any four primary functions of commercial banks. ** 2016
12. State any two functions of IDBI. **2015 (Given)
13. What is Group Bank? **2015
Ans: Group banking is a term that refers to a type of banking plan offered to groups such as
employees in a corporation of people instead of individuals. These plans provide incentives and
other benefits for those who participate, which are not readily available to the bank's other
customers.
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14. When is bank considered as scheduled bank? **2016

Ans: When the paid-up capital and raised funds of the banks should be a minimum of 5
Lakh for qualifying as a scheduled bank.

☺ Sec B
1. Explain the role of Commercial banks in Economic Development. **2021

☺ Sec C
7. Give the meaning and discuss the functions of Commercial Banks. *** *2019, 2018, 2017, 2016,
2014
8. Explain the changing role of Commercial banks in the Indian Economy. **2015

☻ Chapter 3
☺ Sec A
1. State any four financial Institutions. **2021
2. State any two functions of EXIM Bank. **2021
3. What do you mean by Non-banking Institutions (NBFCs)**2019
4. Expand SIDBI. ** 2019
5. Expand SFCs and SIDBI. **2018
6. Expand NBFC and NABARD. **2016
7. State any two features of financial service. **2016

☺ Sec B
1. What are the functions of SFCs. **2019
2. What are the features of Financial Services? **2018
3. What are the objectives of EXIM banks. **2017
4. Bring out any three distinctions between Banking Companies and Non-Banking Financial
Companies. **2016
5. What are the features of Financial Services? **2015
6. State the functions of EXIM Bank. **2014

☺ Sec C
1. What is financial system discuss the various components of financial system. ** 2019
2. What are the functions and problems of State Financial Corporations? **2021
3. Write a note on the following: ****2018
a. Venture Capital
b. Housing Finance
c. Consumer Finance
4. Discuss the objectives and functions of EXIM Bank. **2018, 2015, 2014
5. Explain in detail the different types of financial services. **2017
6. Write short notes on: ****2014
a. Housing and vehicle finance
b. Venture capital.

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☻ Chapter 4
☺ Sec A
1. What is Mutual Funds? **2019, 2014
2. What is factoring? **2021, 2018, 2015
3. What is letter of Credit? **2018, 2017

☺ Sec B
1. Find out the difference between Factoring and Bill Financing. **2021
2. Explain briefly the advantages of mutual funds. **2018
3. Give the classification of Venture Capital funds. **2015
4. What is factoring? State any 4 functions of factoring. **2014

☺ Sec C
7. What is Mutual Funds? Explain the features, advantages & disadvantages and various types of
Mutual Funds. **** 2021, 2019, 2016, 2015
8. Write a note on the following: ****2016
a. Factoring
b. Leasing
c. Venture Capital

☻ General Topics asked:

1. Explain LIC and SIDCs. **** 2021, 2015
Ans: Life Insurance Corporation and State Industrial Development Corporations
2. What is meant by Liquidity? **2021
Ans: Liquidity refers to the ease with which an asset, or security, can be converted into ready
cash without affecting its market price. Cash is the most liquid of assets, while tangible items are
less liquid. The two main types of liquidity include market liquidity and accounting liquidity.
3. What is lender of last resort? **2017
Ans: A lender of last resort is whoever you turn to when you urgently need funds and you've
exhausted all your other options. Banks typically turn to their lender of last resort when they
cannot get the funding they need for their daily business.
4. State the objectives of SEBI. **2021 (Given)
5. State the Functions of SEBI. **202, 2015 (Given)
6. Mention any two objectives of RBI. **2016 (Given)
7. Expand IDBI and SIDCs **2014
Ans: Industrial Development Bank of India and State Industrial Development Corporations
8. What is Monetary Policy? **2014
Ans: Monetary policy is the control of the quantity of money available in an economy and the
channels by which new money is supplied. By managing the money supply, a central bank aims
to influence macroeconomic factors including inflation, the rate of consumption, economic
growth, and overall liquidity.
9. State the objectives of IDBI. Sec B**2021 (Given)
10. Discuss the principles of Liquidity. Sec B**2019
11. Explain the recommendations of Narasimhan Committee. Sec B**2018
Ans: The Narasimhan committee was appointed by the Reserve Bank of India (RBI) in 1969,
soon after the nationalization of 14 banks. The Narasimhan Committee was appointed with
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the mandate of giving recommendations on how the banking facilities could be spread across
India in an adequate manner.
11 Recommendations Made by the Narasimhan Committee on the Financial System of India:
A high level committee was appointed by the Government of India under the Chairmanship of
Shri M. Narasimhan in August 1991 to examine all aspects relating to the structure organisation,
functions and procedures of the financial system.
The committee’s report was tabled in Parliament on December 17, 1991: The main
recommendations of the committee are as follows:
1. Reduction in Liquidity Ratio: Statutory Liquidity Ratio (SLR) to 25 percent over a period
of five years. It also recommended the progressive reduction in Cash Reserve Ratio
(CRR) from the present high level.
2. Abolition of Directed Credit Programmes
3. Free Determination of Interest Rates
4. Improvements in Accounting Systems of the Banks
5. Establishment of Special Tribunals in the banking sector
6. Reconstitution of Banking System of India
7. Abolition of Branch Licensing
8. Foreign Banking
9. More Freedom to Banks
10. Ending of Dual Control: The dual control over the banking system of the Finance
Ministry and Reserve Banks should be ended
11. Financial Institutions:
a) Transferring of direct lending function of IDBI to a separated institution while
retaining to IDBI apex and refinancing role.
b) he Reserve Bank should set up a new agency to supervise financial institutions such
as merchant banks, mutual funds, leasing companies, venture capital companies and
factor companies.
c) Capital market to be liberalized.

12. What are the indication of liquidity of a commercial bank (or Factors affecting the Liquidity of
Commercial Bank)? *** Sec B & Sec C 2016
Ans:

Internal factors affecting the liquidity of banks include the bank's capital base, asset quality,
deposit base, level and quality of management, balance sheet demand and liabilities, quality of securities
and loan portfolio, peculiarities of the customer base, bank image, attraction of funds from external
sources.

Internal factors affecting the liquidity of banks include the bank's capital base, asset quality,
deposit base, level and quality of management, balance sheet demand and liabilities, quality of securities
and loan portfolio, peculiarities of the customer base, bank image, attraction of funds from external
sources.

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13. Discuss the objectives of LIC. Sec B **2018

Ans: The objectives of LIC are:
a) Spread Life Insurance widely and in particular to the rural areas and to the socially and
economically backward classes
b) Maximize mobilization of people's savings by making insurance-linked savings
adequately attractive.
c) Investment of funds, the primary obligation to its policyholders.
d) Conduct business with utmost economy and with the full realization that the moneys
belong to the policyholders.
e) Act as trustees of the insured public in their individual and collective capacities.
f) Meet the various life insurance needs of the community that would arise in the changing
social and economic environment.
g) Involve all people working in the Corporation to the best of their capability in furthering
the interests of the insured public.
h) Promote amongst all agents and employees of the Corporation.

14. Explain any three credit control measures of RBI. Sec B **2016
Ans: Quantitative or traditional methods of credit control include banks rate policy, open
market operations and variable reserve ratio. Qualitative or selective methods of credit control
include regulation of margin requirement, credit rationing, regulation of consumer credit and
direct action.
Quantitative Qualitative

1. Bank rate: It is the rate of interest at which central 1. Margin requirements: It is the
bank lends funds to commercial banks. During difference between the market value of
excess demand or inflationary gap, central bank loan and the security value of loan. At

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increases bank rate. Borrowings become costly and the time of inflation the margin
commercial banks borrow less from central bank. requirement value decreases by RBI for
During deflationary gap central bank decreases the discouraging people and commercial
bank rate. It is cheap to borrow from the central banks for approaching more and more
bank or the part of the commercial banks which in amount of loan. On the other hand at
turn the Commercial banks also decreases their the time of deflation the RBI increases
lending rates. the value of margin just to encourage
2. Open market operations: The open market issuing of more amount of loan to the
operations means buying and selling of bonds and commercial banks and general public.
shares by RBI is open market. It is also called 2. Moral Compulsion: It refers to written
buying and selling of government security by the or oral advices given by central bank to
central bank from the public and commercial banks. commercial banks to restrict or expand
3. Legal Reserve Requirement: It is another method of credit.
RBI for controlling credit or supply of money. It 3. Direct Action: Sometimes the RBI
includes 2 types of methods such as: directly takes action against the
commercial banks. It takes action to
a) Cash Reserve Ratio (CRR): It is the ratio of such type of commercial banks who are
bank deposits that commercial bank has to keep not following the rules regulation of
with the central bank. At the time of inflation RBI. It cancels their registration or
the RBI increases the rate of CRR, similarly at nationalization of commercial banks.
the time of deflation RBI decreases the rate of 4. Rationing of credit: It is the related to
CRR. limiting the amount of credit, which is
b) Statutory Liquidity Ratio (SLR): Every bank issued by all the commercial banks.
required to maintain a fixed percentage of its RBI fixes the size of issuing the credit
assets in the form of cash or other liquid assets according to the requirement of the
called SLR. At the time of inflation the RBI country.
increases the SLR, similarly at the time of
deflation RBI decreases the rate of SLR.

15. Mention six functions of RBI. Sec B ** 2014 (Given)

16. Explain the functions of RBI. Sec C *** 2021, 2017
Ans: Meaning: The Reserve Bank of India is India's central bank and regulatory body and is
responsible for the issue and supply of the Indian rupee and the regulation of the Indian banking
system. It also manages the country's main payment systems and works to promote its economic
development.

 Functions of Reserve Bank

1) Issue of Notes —The Reserve Bank has a monopoly for printing the currency notes in the
country. It has the sole right to issue currency notes of various denominations except one rupee
note (which is issued by the Ministry of Finance).
2) Banker to the Government–The second important function of the Reserve Bank is to act as the
Banker, Agent and Adviser to the Government of India and states. It performs all the banking
functions of the State and Central Government and it also tenders useful advice to the
government on matters related to economic and monetary policy. It also manages the public
debt of the government.
3) Banker’s Bank:- The Reserve Bank performs the same functions for the other commercial
banks as the other banks ordinarily perform for their customers. RBI lends money to all the
commercial banks of the country.
4) Controller of the Credit:- The RBI undertakes the responsibility of controlling credit created
by commercial banks. RBI uses two methods to control the extra flow of money in the
economy. These methods are quantitative and qualitative techniques to control and regulate
the credit flow in the country.
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5) Custodian of Foreign Reserves:-For the purpose of keeping the foreign exchange rates stable,
the Reserve Bank buys and sells foreign currencies and also protects the country's foreign
exchange funds. RBI sells the foreign currency in the foreign exchange market when its supply
decreases in the economy and vice-versa. Currently, India has a Foreign Exchange Reserve of
around US$ 487 bn.
6) Other Functions:- The Reserve Bank performs a number of other developmental works.
These works include:
a) The function of clearinghouse arranging credit for agriculture (which has been
transferred to NABARD)
b) Collecting and publishing the economic data
c) Buying and selling of Government securities (gilt edge, treasury bills etc) and trade
bills.
d) Giving loans to the Government buying and selling of valuable commodities etc.
e) It also acts as the representative of the Government in the International Monetary Fund
(I.M.F.) and represents the membership of India.

17. Explain the quantitative and qualitative credit control of RBI Sec C**2017, 2015 (Given)
18. What is Stock Exchange? Explain the purpose of SEBI Act and its functions. Sec C **2018
Ans: Meaning: SEBI full form is Securities and Exchange Board of India
SEBI is a statutory regulatory body established by the Government of India to regulate
the securities market in India and protect the interests of investors in securities. It also regulates
the functioning of the stock market, mutual funds, etc.

 Objectives of SEBI
a) To monitor the activities of the stock exchange.
b) To safeguard the rights of the investors
c) To curb fraudulent practices by maintaining a balance between statutory regulations and
self-regulation.
d) To ban the internal trading.
e) SEBI also governs a company’s takeover.
f) To define the code of conduct for the brokers, underwriters, and other intermediaries.
 Powers and Functions that SEBI are:
a) It checks price manipulation
b) It bans Insider trading
c) It prohibits unfair and fraudulent trade practices
d) It promotes a fair code of conduct in the security market
e) It takes efforts to educate the investors regarding ways to evaluate the investment options
better
f) It has designed a code of conduct, rules, and regulations to regulate the brokers,
underwriters, and other intermediaries.
g) SEBI also governs a company’s takeover.
h) It regulates and registers the workings of share transfer agents, stockbrokers, merchant
bankers, trustees, and others who are linked with the stock exchange.
i) It regulates and registers the mutual funds as well.
j) It conducts audits and inquiries of stock exchanges.
k) As a part of its developmental functions, SEBI performs the following role:
l) It facilitates the training of the intermediaries.
m) It aims at promoting activities of the stock exchange by having an adoptable and flexible
approach.

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19. What is Stock Exchange? Discuss the features and advantages (can write functions) of stock
exchange. Sec C **2016 (Given)
20. Explain the functions of IDBI. Sec C **2014
Ans: Meaning: Industrial Development Bank of India (IDBI) established under Industrial
Development Bank of India Act, 1964, is the principal financial institution for providing credit
and other facilities for developing industries and assisting development institutions.

 The main objectives of IDBI

a) Co-ordination, regulation and supervision of the working of other financial institutions
such as IFCI , ICICI, UTI, LIC, Commercial Banks and SFCs.
b) Supplementing the resources of other financial institutions and there by widening the
scope of their assistance.
c) Planning, promotion and development of key industries
and diversification of industrial growth.
d) Devising and enforcing a system of industrial growth that conforms to national priorities.
e) The principal objective is to give loans both to the private as well as public sector
undertaking in the field of commodity production, mining and services such as hotels and
transport.
f) This bank provides loans to the industries directly.

 The role and Functions of IDBI are:

a) To grant loans and advances to IFCI, SFCs or any other financial institution by way of
refinancing of loans granted by such institutions which are repayable within 25 year.
b) To grant loans and advances to scheduled banks or state co-operative banks by way of
refinancing of loans granted by such institutions which are repayable in 15 years.
c) To grant loans and advances to IFCI, SFCs, other institutions, scheduled banks, state co-
operative banks by way of refinancing of loans granted by such institution to industrial
concerns for exports.
d) To discount or re-discount bills of industrial concerns.
e) To underwrite or to subscribe to shares or debentures of industrial concerns.
f) To subscribe to or purchase stock, shares, bonds and debentures of other financial
institutions.
g) To grant line of credit or loans and advances to other financial institutions such as IFCI,
SFCs, etc.
h) To grant loans to any industrial concern.
i) To guarantee deferred payment due from any industrial concern.
j) To guarantee loans raised by industrial concerns in the market or from institutions.
k) To provide consultancy and merchant banking services in or outside India.
l) To provide technical, legal, marketing and administrative assistance to any industrial
concern or person for promotion, management or expansion of any industry.
m) Planning, promoting and developing industries to fill up gaps in the industrial structure in
India.
n) To act as trustee for the holders of debentures or other securities.

All the Best

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