UPSC Prelims Practice Questions — ICICI Prudential Life’s Bagchi named HDFC Bank MD, CEO

Q1. With reference to the control exercised by the Reserve Bank of India over the top management of a private sector banking company under the Banking Regulation Act, 1949, consider the following statements: Which of the statements given above is/are correct?

  1. The appointment of a chief executive officer by the bank's board has no effect unless it is made with the previous approval of the Reserve Bank.
  2. The termination of appointment of a whole-time director by the bank also requires the previous approval of the Reserve Bank.
  3. A change in the remuneration of the managing director takes effect only with the Reserve Bank's approval, even after the bank's shareholders have passed a resolution approving it.
  • A. 1, 2 and 3
  • B. 1 and 2 only
  • C. 1 and 3 only
  • D. 2 and 3 only

Q2. In India, which one of the following correctly describes how the top executive of a private sector bank and the top executive of a public sector bank, respectively, come to hold office?

  • A. Private bank: board selects, Government gives prior approval; public sector bank: FSIB recommends, RBI appoints
  • B. Private bank: FSIB recommends, RBI appoints; public sector bank: board selects, Government gives prior approval
  • C. Private bank: board selects, RBI gives prior approval; public sector bank: FSIB recommends, Government appoints
  • D. Private bank: board selects, SEBI gives prior approval; public sector bank: RBI recommends, Government appoints

Q3. Consider the following statements: Which of the following is correct in respect of the above statements?

  1. Although HDFC Bank's board chose Anup Bagchi as its MD & CEO, the appointment could take effect only after it was approved by the Reserve Bank of India.
  2. HDFC Bank is designated a Domestic Systemically Important Bank and must hold additional Common Equity Tier 1 capital over and above the Capital Conservation Buffer.
  • A. Both Statement-I and Statement-II are correct and Statement-II explains Statement-I
  • B. Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-I
  • C. Statement-I is correct, but Statement-II is incorrect
  • D. Statement-I is incorrect, but Statement-II is correct

Q4. With reference to the RBI's framework for Domestic Systemically Important Banks (D-SIBs), consider the following statements: Which of the statements given above is/are correct?

  1. The additional capital surcharge on a D-SIB may be met by issuing Additional Tier 1 instruments such as perpetual bonds.
  2. The surcharge on a D-SIB is expressed as a proportion of its risk-weighted assets rather than of its total deposits.
  3. D-SIB designation is reviewed periodically using systemic importance scores, so the bucket in which a bank is placed can change over time.
  • A. 1 and 3 only
  • B. 2 and 3 only
  • C. 1 and 2 only
  • D. 1, 2, and 3

Q5. With reference to the coordination of financial sector regulation in India, consider the following statements: Which of the statements given above is/are correct?

  1. Because a single financial group may run banking, insurance and securities businesses that are each supervised by a different regulator, no single sectoral regulator by itself sees the group's full risk profile.
  2. The Financial Stability and Development Council is a statutory regulator empowered to issue binding directions to banks and insurers within a financial conglomerate.
  3. The mandate of the Financial Stability and Development Council includes macro-prudential supervision of the economy, including the functioning of large financial conglomerates.
  • A. 1 only
  • B. 2 and 3 only
  • C. 1, 2 and 3
  • D. 1 and 3 only

Q6. When HDFC Ltd, a housing finance company, merged into HDFC Bank with effect from July 1, 2023, the RBI gave the bank three years to meet priority sector lending norms in respect of the inherited loans, but allowed no relaxation in the cash reserve ratio and statutory liquidity ratio requirements. Which of the following inferences can be drawn from the above?

  1. The inherited loan book enlarged the base against which the bank's priority sector lending targets are measured.
  2. From the effective date, the merged bank had to maintain reserve requirements in respect of the liabilities it took over from the housing finance company.
  3. The housing finance company had already been maintaining CRR and SLR on the same basis as a bank before the merger, which is why no relaxation was needed.
  • A. 1 and 2 only
  • B. 1, 2 and 3
  • C. 1 only
  • D. 2 and 3 only