UPSC Prelims Practice Questions — Protecting public against money-lenders

Q1. In the Seventh Schedule to the Constitution of India, the subject 'Money-lending and money-lenders; relief of agricultural indebtedness' figures as which numbered entry of the State List (List II)?

  • A. Entry 24
  • B. Entry 30
  • C. Entry 45
  • D. Entry 52

Q2. Money-lending is a State subject, yet a closely related field of credit is placed under Parliament's exclusive competence. Which one of the following subjects, unlike money-lending, falls under the Union List of the Seventh Schedule?

  • A. Banking
  • B. Relief of agricultural indebtedness
  • C. Money-lenders
  • D. Trade and commerce within the State

Q3. Under the draft Banning of Unregulated Lending Activities (BULA) Bill released in December 2024, the term 'unregulated lending activity' is best described as—

  • A. lending activity that is not covered by any law governing regulated lending, whether carried out digitally or otherwise
  • B. any loan advanced at an interest rate exceeding the ceiling fixed under a State Money Lenders Act
  • C. any collateral-free loan given to a household by a person other than a relative or friend
  • D. deposit-taking by an entity not registered with a financial-sector regulator

Q4. Consider the following statements comparing the draft Banning of Unregulated Lending Activities (BULA) Bill with the earlier Banning of Unregulated Deposit Schemes framework: 1. The BULA Bill is aimed at unregulated lending, whereas the earlier deposit-schemes law was aimed at unregulated deposit-taking. 2. The draft BULA Bill was released by the Ministry of Finance for public consultation in December 2024. 3. Like its deposit-schemes predecessor, the BULA Bill keeps digital lending apps outside its scope. Which of the statements given above is/are correct?

  1. The BULA Bill is aimed at unregulated lending, whereas the earlier deposit-schemes law was aimed at unregulated deposit-taking.
  2. The draft BULA Bill was released by the Ministry of Finance for public consultation in December 2024.
  3. Like its deposit-schemes predecessor, the BULA Bill keeps digital lending apps outside its scope.
  • A. 1 and 2 only
  • B. 2 and 3 only
  • C. 1 and 3 only
  • D. 1, 2 and 3

Q5. Consider the following State Money Lenders Acts and their years of enactment: 1. Kerala Money Lenders Act — 1958 2. Karnataka Money Lenders Act — 1961 3. Tamil Nadu Money Lenders Act — 1957 4. Rajasthan Money Lenders Act — 1971 Which of the above are correctly matched?

  1. Kerala Money Lenders Act — 1958
  2. Karnataka Money Lenders Act — 1961
  3. Tamil Nadu Money Lenders Act — 1957
  4. Rajasthan Money Lenders Act — 1971
  • A. 1, 2 and 3
  • B. 1, 2 and 4
  • C. 2, 3 and 4
  • D. 1, 2, 3 and 4

Q6. Among the Money Lenders Acts of Kerala, Karnataka, Tamil Nadu and Rajasthan, how many were enacted during the decade of the 1950s?

  • A. One
  • B. Two
  • C. Three
  • D. Four

Q7. Digital lending in India, including lending carried out through Digital Lending Apps, is regulated primarily by which one of the following authorities?

  • A. Securities and Exchange Board of India
  • B. Reserve Bank of India
  • C. Insurance Regulatory and Development Authority of India
  • D. Ministry of Corporate Affairs

Q8. Under the RBI's guidelines on Default Loss Guarantee (DLG) in digital lending, the total amount of DLG cover on any outstanding loan portfolio, specified upfront, shall not exceed what proportion of that portfolio?

  • A. 5 per cent
  • B. 10 per cent
  • C. 12 per cent
  • D. 25 per cent

Q9. Which colonial-era Central legislation empowered courts to reopen a loan transaction and grant relief to the borrower where the interest charged was 'excessive' and the transaction was 'unfair'?

  • A. Usurious Loans Act, 1918
  • B. Bengal Money-Lenders Act, 1940
  • C. Deccan Agriculturists' Relief Act, 1879
  • D. Negotiable Instruments Act, 1881

Q10. Under the RBI (Regulatory Framework for Microfinance Loans) Directions, 2022, a 'microfinance loan' is defined as—

  • A. a collateral-free loan given to a household having annual household income up to ₹3,00,000
  • B. any loan given only to women's self-help groups, irrespective of household income
  • C. a secured loan given exclusively to rural households below the poverty line
  • D. a collateral-free loan whose monthly repayment obligation is capped at 10 per cent of monthly household income

Q11. Consider the following statements about the All-India Rural Credit Survey and its Committee of Direction: 1. The Committee of Direction, which submitted its report in 1954, was chaired by A.D. Gorwala. 2. The Survey found that cooperatives supplied only an insignificant share of rural credit while moneylenders dominated. 3. To counter moneylenders, the Committee recommended abolishing cooperative credit institutions in favour of commercial banks. Which of the statements given above is/are correct?

  1. The Committee of Direction, which submitted its report in 1954, was chaired by A.D. Gorwala.
  2. The Survey found that cooperatives supplied only an insignificant share of rural credit while moneylenders dominated.
  3. To counter moneylenders, the Committee recommended abolishing cooperative credit institutions in favour of commercial banks.
  • A. 1 and 3 only
  • B. 1 and 2 only
  • C. 2 and 3 only
  • D. 1, 2 and 3