Types of Banks & Accounts

What you'll learn

A clear, exam-ready guide to India's bank types (public, private, RRB, Small Finance and Payments), every deposit account (savings, current, RD, FD, NRE/NRO), and KYC basics, all taught from scratch with simple Indian analogies.

This chapter has

Types of Banks & Accounts — solved practice questions

8 Banking Banking & Financial Awareness questions with step-by-step solutions. Attempt each, then reveal the answer.

1. Q1medium

   Banks that are included in the Second Schedule of the RBI Act, 1934 are called:

   • AScheduled banks
   • BCooperative banks
   • CDevelopment banks
   • DNon-scheduled banks
   Show answer & solution

   Correct answer: (A) Scheduled banks

   Banks listed in the Second Schedule of the RBI Act, 1934 (meeting the prescribed capital and other norms) are known as scheduled banks.

2. Q2easy

   Regional Rural Banks (RRBs) were established primarily to:

   • AFinance large industries
   • BRegulate cooperative banks
   • CManage the country's foreign exchange
   • DProvide credit to the rural and agricultural sectors
   Show answer & solution

   Correct answer: (D) Provide credit to the rural and agricultural sectors

   RRBs were set up to provide banking and credit facilities to the rural population, small farmers and agricultural labourers.

3. Q3medium

   Which type of bank can accept limited deposits but is not permitted to lend or issue credit cards on its own?

   • APayments Bank
   • BSmall Finance Bank
   • CRegional Rural Bank
   • DCooperative Bank
   Show answer & solution

   Correct answer: (A) Payments Bank

   Payments banks can accept limited deposits and offer remittance and payment services but cannot lend or issue credit cards.

4. Q4easy

   A current account is most suitable for:

   • ASalaried individuals saving money
   • BStudents earning interest
   • CBusinesses with frequent transactions
   • DRetired pensioners
   Show answer & solution

   Correct answer: (C) Businesses with frequent transactions

   Current accounts are designed for businesses and firms with frequent transactions; they usually pay no interest but allow overdraft facilities.

5. Q5easy

   Which of the following accounts generally earns the depositor the highest rate of interest?

   • ASavings account
   • BCurrent account
   • CFixed (term) deposit
   • DBasic Savings Bank Deposit Account
   Show answer & solution

   Correct answer: (C) Fixed (term) deposit

   A fixed (term) deposit locks money for a set period and typically offers a higher interest rate than savings or current accounts.

6. Q6easy

   In a Recurring Deposit account, the depositor:

   • ADeposits a single lump sum for a fixed term
   • BDeposits a fixed amount every month for a fixed period
   • CCan withdraw any amount anytime without limit
   • DEarns no interest at all
   Show answer & solution

   Correct answer: (B) Deposits a fixed amount every month for a fixed period

   A recurring deposit requires the customer to deposit a fixed amount at regular (usually monthly) intervals for a predetermined period.

7. Q7hard

   An NRE (Non-Resident External) account is used by an NRI to deposit:

   • AIncome earned within India
   • BOnly foreign currency without any conversion
   • CLoans taken within India
   • DIncome earned abroad, maintained in Indian rupees
   Show answer & solution

   Correct answer: (D) Income earned abroad, maintained in Indian rupees

   An NRE account holds income earned abroad, maintained in Indian rupees; both principal and interest are freely repatriable.

8. Q8hard

   Which account allows a Non-Resident Indian to hold a term deposit in foreign currency, avoiding exchange-rate risk?

   • ANRE account
   • BNRO account
   • CFCNR account
   • DBSBDA
   Show answer & solution

   Correct answer: (C) FCNR account

   A Foreign Currency Non-Resident (FCNR) account is a term deposit held in foreign currency, protecting the holder from currency fluctuation risk.

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