UPSC Prelims Practice Questions — The DAILY QUIZ

Q1. Under which section of the Reserve Bank of India Act, 1934 does the Reserve Bank of India derive its sole right to issue banknotes in India?

• A. Section 22
• B. Section 24
• C. Section 25
• D. Section 26

Q2. The following denominations were part of the original Mahatma Gandhi Series of banknotes introduced by the RBI in 1996. Which of the above is/are NOT correctly included in that original 1996 series?

1. ₹5
2. ₹500
3. ₹1000
4. ₹2000

• A. 1 and 2
• B. 2 and 3
• C. 1, 2 and 3
• D. 4 only

Q3. Following the withdrawal of the ₹2000 banknote, at how many RBI Issue Offices is the exchange/deposit facility for these notes currently available?

• A. 14
• B. 19
• C. 23
• D. 29

Q4. With reference to the ₹2000 banknote, consider the following statements. Which of the above is/are correctly identified?

1. It was introduced in November 2016 under Section 24(1) of the RBI Act, 1934.
2. Its reverse carried the motif of Mangalyaan (the Mars Orbiter Mission).
3. It was withdrawn from circulation in pursuance of the RBI's Clean Note Policy.
4. On its withdrawal from circulation, it simultaneously ceased to be legal tender.

• A. 1, 2 and 3
• B. 1 and 4 only
• C. 2 and 3 only
• D. 1, 2, 3 and 4

Q5. On which denomination did the portrait of Mahatma Gandhi first appear on an Indian banknote (October 1987)?

• A. ₹100
• B. ₹500
• C. ₹1000
• D. ₹2000

Q6. In the context of the 1987 ₹500 note that first carried Gandhi's portrait, the 'watermark' of a banknote refers to which one of the following?

• A. A design or image incorporated into the paper during its manufacture, visible when the note is held against light
• B. A latent image that becomes visible only under ultraviolet light
• C. A raised intaglio-printed feature meant for identification by the visually impaired
• D. A metallic security thread woven through the paper

Q7. In the context of the 1978 action against high-denomination notes, 'demonetisation' precisely refers to which one of the following?

• A. Stripping specified banknotes of their status as legal tender
• B. Temporarily suspending exchange of notes while retaining their legal tender status
• C. Lowering the printed face value of existing high-denomination notes
• D. Withdrawing only soiled and worn notes under a clean-note programme

Q8. Consider the following as factors that contributed to the depreciation of the Indian rupee against the US dollar in 2025-26. Which of the above is/are NOT a correct factor?

1. A surge in global crude oil prices amid West Asia tensions
2. Sustained foreign portfolio investor (FPI) outflows from Indian equities
3. A widening merchandise trade surplus
4. Strong dollar demand from importers

• A. 1 and 2
• B. 2 and 4
• C. 3 only
• D. 1, 3 and 4

Q9. With reference to the RBI's management of the rupee's exchange rate in the recent depreciation episode, consider the following statements. Which of the statements given above is/are correct?

1. Compared with its earlier practice, since late 2024 the RBI has allowed the rupee to move in a more market-determined manner rather than defending a narrow band.
2. To curb excessive volatility, the RBI can sell US dollars out of its foreign exchange reserves.
3. A depreciating rupee makes India's imports cheaper and its exports costlier.

• A. 1 only
• B. 1 and 2 only
• C. 2 and 3 only
• D. 1, 2 and 3

Q10. Under Section 24 of the Reserve Bank of India Act, 1934, up to what maximum denomination is the Reserve Bank of India empowered to issue banknotes?

• A. ₹2,000
• B. ₹5,000
• C. ₹10,000
• D. ₹1,00,000

Q11. The design of Indian banknotes — including the national symbols and monuments depicted on them — is finally approved by which authority?

• A. The Reserve Bank of India, acting independently
• B. The Central Government, on the recommendation of the RBI's Central Board
• C. The Ministry of Culture, Government of India
• D. The Security Printing and Minting Corporation of India (SPMCIL)