Kerala SSLC · Social Science · Class 10
Financial Institutions and Services: Important Questions with Answers
These are 10 important multiple-choice questions from the Kerala SSLC Social Science chapter “Financial Institutions and Services” (Kerala SCERT syllabus). Each one shows the correct answer and a short explanation of why it is right. Try answering before you read the answer. ExamSummary has 10 practice questions on this chapter in total.
Q1.Which institution is responsible for regulating the monetary policy and issuing currency notes in India?
- A)Ministry of Finance
- B)Reserve Bank of India
- C)Securities and Exchange Board of India
- D)NITI Aayog
Answer: B) Reserve Bank of India
The Reserve Bank of India (RBI) acts as the central bank of the country. It controls the supply of money and issues currency notes while managing inflation.
Q2.Why do business owners prefer a Current Account over a Savings Account?
- A)It earns higher interest rates than savings accounts.
- B)It allows unlimited withdrawals and transactions without restrictions.
- C)It requires a minimum balance of only Rs. 1000.
- D)It offers free insurance coverage.
Answer: B) It allows unlimited withdrawals and transactions without restrictions.
Current accounts are designed for businesses to facilitate frequent transactions and cash flow management. Unlike savings accounts, they do not earn interest but allow unlimited withdrawals and overdraft facilities.
Q3.What distinguishes a 'Secured Loan' from an 'Unsecured Loan'?
- A)Secured loans have lower interest rates regardless of credit score.
- B)Secured loans require collateral security against the amount borrowed.
- C)Unsecured loans are only available for students.
- D)Secured loans cannot be repaid early.
Answer: B) Secured loans require collateral security against the amount borrowed.
A secured loan requires the borrower to pledge an asset, such as property or gold, as collateral. If the borrower defaults, the lender can seize this collateral to recover the loss.
Q4.How does a Self-Help Group (SHG) primarily help its members access finance?
- A)By providing government grants directly to every member.
- B)By pooling savings and linking with banks for larger loans.
- C)By acting as a stock market broker for members.
- D)By replacing commercial banks entirely in rural areas.
Answer: B) By pooling savings and linking with banks for larger loans.
SHGs collect regular savings from members to create a fund for internal lending. They then use their collective strength to link with formal banks to obtain larger loans at reasonable interest rates.
Q5.What is the full form of UPI in the context of digital banking?
- A)Universal Payment Interface
- B)Unified Payment Interface
- C)Unique Personal Identification
- D)United Public Investment
Answer: B) Unified Payment Interface
UPI stands for Unified Payments Interface, a system that facilitates instant inter-bank transactions via smartphones. It allows users to send money using a virtual payment address without sharing sensitive bank details.
Q6.Who owns and manages a Cooperative Bank?
- A)The Central Government exclusively.
- B)Private shareholders looking for maximum profit.
- C)Its members who are also the customers of the bank.
- D)Foreign investors seeking high returns.
Answer: C) Its members who are also the customers of the bank.
Cooperative banks operate on the principle of cooperation, meaning they are owned and managed by their members. These members are typically the depositors and borrowers within a specific community or region.
Q7.Which of the following is a key restriction placed on Non-Banking Financial Companies (NBFCs)?
- A)They cannot lend money to individuals.
- B)They cannot accept demand deposits like savings accounts.
- C)They are not allowed to invest in government bonds.
- D)They must charge higher interest than commercial banks.
Answer: B) They cannot accept demand deposits like savings accounts.
NBFCs provide banking-like services but are not licensed as banks. A major legal distinction is that they cannot accept demand deposits from the public, unlike commercial banks.
Q8.What is the main objective of 'Priority Sector Lending' by banks?
- A)To maximize profits from corporate clients.
- B)To ensure credit flows to agriculture and weaker sections of society.
- C)To reduce the number of branches in urban areas.
- D)To increase foreign exchange reserves.
Answer: B) To ensure credit flows to agriculture and weaker sections of society.
Priority Sector Lending mandates banks to allocate a certain percentage of their loans to sectors like agriculture, MSMEs, and education. This ensures financial inclusion and supports economic growth in essential but underserved areas.
Q9.How does a Credit Card differ from a Debit Card in terms of transaction funds?
- A)Credit cards deduct money immediately from your bank account.
- B)Debit cards allow you to spend money you do not currently possess.
- C)Credit cards borrow money from the bank up to a limit, while debit cards use your own money.
- D)There is no difference between the two types of cards.
Answer: C) Credit cards borrow money from the bank up to a limit, while debit cards use your own money.
A credit card allows the user to borrow funds up to a pre-set limit and repay later, whereas a debit card deducts funds directly from the user's bank account instantly. This makes credit cards a form of short-term borrowing.
Q10.Which category of people is the primary target for Microcredit schemes?
- A)Large multinational corporations.
- B)Individuals with substantial collateral.
- C)Low-income individuals lacking access to traditional banking.
- D)Government officials requiring travel loans.
Answer: C) Low-income individuals lacking access to traditional banking.
Microcredit aims to provide small loans to low-income individuals who lack collateral or credit history. This enables them to start small businesses and improve their economic conditions without relying on large banks.