UPSC Prelims Practice Questions — India to push for reporting of offshore rupee trade despite resistance: sources

Q1. In the context of offshore currency markets, a Non-Deliverable Forward (NDF) contract on the Indian rupee is best described as:

  • A. A forward currency contract that is settled in cash in a convertible currency such as the US dollar, without any physical delivery of the underlying restricted currency
  • B. A spot transaction in which both currencies are physically exchanged within two business days of the trade
  • C. A deliverable forward contract requiring physical delivery of the rupee on maturity at a pre-agreed rate
  • D. A currency swap in which two parties exchange principal and interest streams in two different currencies over the life of the contract

Q2. The regulation of the domestic foreign exchange market and the oversight of Indian banks' participation in offshore rupee derivative (NDF) markets fall under the jurisdiction of which one of the following?

  • A. Reserve Bank of India
  • B. Securities and Exchange Board of India
  • C. International Financial Services Centres Authority
  • D. Department of Economic Affairs, Ministry of Finance

Q3. Under the RBI's 2020 measure permitting Indian banks to participate in the offshore non-deliverable rupee derivative market, which category of entities was authorised to undertake such transactions?

  • A. Authorised Dealer Category-I banks
  • B. All scheduled commercial banks including regional rural banks
  • C. Only stand-alone primary dealers
  • D. Urban cooperative banks holding an AD Category-II licence

Q4. The RBI's circular allowing Authorised Dealer Category-I banks to participate in the offshore non-deliverable rupee derivative market came into effect in:

  • A. June 2020
  • B. March 2020
  • C. July 2019
  • D. June 2022

Q5. The RBI's 2026 proposal on offshore rupee trade reporting essentially requires banks to:

  • A. Report the rupee foreign-exchange derivative transactions undertaken globally by their related parties and overseas offices
  • B. Cease all participation in offshore non-deliverable forward markets
  • C. Convert all their offshore rupee positions into onshore deliverable forwards
  • D. Route every offshore rupee trade exclusively through Special Rupee Vostro Accounts

Q6. Under the RBI's licensing framework for dealing in foreign exchange, Authorised Dealers are classified into how many categories?

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

Q7. Authorised Dealer banks in India are licensed to deal in foreign exchange under the provisions of which one of the following?

  • A. Foreign Exchange Management Act, 1999
  • B. Foreign Exchange Regulation Act, 1973
  • C. Banking Regulation Act, 1949
  • D. Reserve Bank of India Act, 1934

Q8. Which one of the following is the principal mechanism introduced by the RBI in 2022 to enable the settlement of international trade in Indian rupees?

  • A. Special Rupee Vostro Account (SRVA) arrangement
  • B. Liberalised Remittance Scheme
  • C. Fully Accessible Route for government securities
  • D. Sovereign Gold Bond scheme