RBI Grade B General / DEPR Agricultural Finance, Credit & Rural Banking: practice questions

Question 1 · easy

Burgess and Pande (2005) studied a large state-directed expansion of rural bank branches. Their main finding was that the expansion

1. Had no measurable effect on the incomes of rural households
2. Was linked to lower rural poverty
3. Raised the moneylenders' share of rural household borrowing
4. Caused a collapse of rural deposits as savers moved to towns

Question 2 · medium

Which is a typical stated objective when a government nationalises commercial banks to support agriculture?

1. To raise interest rates on farm loans so that banks can cover the cost of opening branches in rural areas
2. To spread credit to agriculture, small enterprise and weaker sections instead of large business houses
3. To end all lending targets
4. To privatise cooperative banks

Question 3 · medium

A subsidised crop-loan scheme raises its eligible loan ceiling from 300,000 to 500,000 currency units. Which farmers gain most directly?

1. Farmers with no bank account and no access to the scheme
2. Farmers borrowing less than 300,000 who were already fully covered
3. Those borrowing over 300,000, now subsidised on more of it
4. Tenants without documents who were excluded from the scheme before

Question 4 · easy

The Asian Development Bank, established in 1966, has its headquarters in

1. Washington, D.C.
2. Tokyo
3. Manila
4. Rome

Question 5 · medium

Which arm of the World Bank Group lends to the poorest countries on concessional terms?

1. International Development Association (IDA)
2. Asian Development Bank (ADB)
3. International Fund for Agricultural Development (IFAD)
4. International Bank for Reconstruction and Development (IBRD)

Question 6 · medium

Tradable priority-sector lending certificates allow

1. Banks to sell agricultural loans with their credit risk to other banks, so the buyer takes over the underlying loan assets
2. Farmers to trade their revolving credit limits
3. Development banks to issue bonds to farmers
4. A bank that has over-achieved to sell its surplus achievement to a bank in shortfall, without transferring loans

Question 7 · easy

Under a tradable lending-certificate system, bank A exceeds its agricultural target by 200 million currency units and sells 150 million of certificates to bank B, which was short by that amount. Who holds the underlying loans and their credit risk afterwards?

1. Bank B holds both the loans and the risk
2. Bank A still holds the loans and risk
3. The central bank takes over the loans
4. Banks A and B split the loans equally

Question 8 · hard

A regulation caps a household's total loan repayments at 50 per cent of its monthly income. A household earns 20,000 currency units a month and already repays 6,000 a month. The maximum additional monthly repayment a new microfinance loan could add, in currency units, is

1. 4,000
2. 10,000
3. 14,000
4. 6,000

Question 9 · medium

Which regulatory tool lets every microlender see a borrower's existing loans before lending again?

1. Credit-bureau reporting
2. Interest subsidies on crop loans
3. Lending mandates for banks
4. Branch-licensing rules for banks

Question 10 · hard

The branch-licensing policy that followed bank nationalisation in several countries mainly sought to

1. Close unprofitable rural branches
2. Tie new urban branch licences to the opening of rural branches
3. Stop foreign banks from opening branches
4. Convert branches into cooperative societies