UPSC Prelims Practice Questions — Reserve Bank of India (RBI) signs a Memorandum of Understanding with the European Securities and Markets Authority (ESMA)

Q1. With reference to the Memorandum of Understanding signed between the Reserve Bank of India and the European Securities and Markets Authority (ESMA) in January 2026, which of the following are correctly identified?

  1. It was signed with the prior approval of the Union Cabinet.
  2. It replaces an earlier RBI-ESMA agreement originally entered into in 2017.
  3. It empowers ESMA to carry out direct on-site inspections of the Clearing Corporation of India.
  4. It covers the Clearing Corporation of India as well as other RBI-regulated central counterparties.
  • A. 1 and 4 only
  • B. 2 and 3 only
  • C. 1, 2 and 4
  • D. 1, 2, 3 and 4

Q2. The RBI-ESMA MoU of 2026 differs from the arrangement it superseded. Consider the following statements. Which of the statements given above is/are correct?

  1. The 2026 MoU replaces an earlier RBI-ESMA agreement originally entered into in 2017.
  2. Under the 2026 MoU, ESMA places reliance on the RBI's regulatory and supervisory activities rather than exercising direct oversight of Indian central counterparties.
  3. Under the 2026 MoU, the RBI conceded ESMA's demand for direct audit and inspection rights over Indian central counterparties.
  • A. 1 only
  • B. 1 and 2 only
  • C. 2 and 3 only
  • D. 1, 2 and 3

Q3. Under the revised European Market Infrastructure Regulation (EMIR 2.2), into how many tiers are third-country central counterparties classified for the purpose of recognition and supervision by ESMA?

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

Q4. Under the European Union's EMIR framework, which one of the following authorities is responsible for granting recognition to a non-EU ('third-country') central counterparty before it may provide clearing services to clearing members established in the EU?

  • A. European Securities and Markets Authority (ESMA)
  • B. European Central Bank (ECB)
  • C. European Banking Authority (EBA)
  • D. European Systemic Risk Board (ESRB)

Q5. The Clearing Corporation of India Ltd (CCIL) is authorised and supervised by the Reserve Bank of India under which one of the following statutes?

  • A. Payment and Settlement Systems Act, 2007
  • B. Securities Contracts (Regulation) Act, 1956
  • C. Reserve Bank of India Act, 1934
  • D. Depositories Act, 1996

Q6. In the context of clearing corporations such as CCIL, the term 'novation' refers to which one of the following?

  • A. The interposing of the clearing corporation between the two parties to a trade so that it becomes the buyer to every seller and the seller to every buyer
  • B. The offsetting of multiple mutual obligations between two parties into a single net payable or receivable
  • C. The collection of margins and default-fund contributions from clearing members to cover potential losses
  • D. The final and irrevocable transfer of securities and funds that completes a trade

Q7. In October 2022, ESMA withdrew its recognition from how many India-based clearing corporations?

  • A. Three
  • B. Four
  • C. Six
  • D. Nine

Q8. With reference to the RBI-Bank of England arrangement for recognition of CCIL, consider the following statements. Which of the above is/are NOT correct?

  1. The RBI-Bank of England MoU on CCIL was signed in December 2023.
  2. Under the arrangement, the Bank of England relies on the RBI's regulatory and supervisory oversight of CCIL.
  3. CCIL was approved as a non-UK central counterparty by the Bank of England.
  4. The Bank of England signed this MoU only after the European Union's ESMA had already restored CCIL's recognition.
  • A. 1 only
  • B. 2 and 3
  • C. 4 only
  • D. 1 and 4

Q9. Comparing the RBI-Bank of England arrangement (2023) with the RBI-ESMA arrangement (2026) for recognition of CCIL, consider the following statements. Which of the statements given above is/are correct?

  1. The Bank of England arrangement preceded the ESMA arrangement in resolving CCIL's overseas recognition.
  2. Both arrangements rest on a deference model relying on the RBI's home-country supervision of CCIL.
  3. Unlike the Bank of England, ESMA had never withdrawn recognition of CCIL prior to signing its MoU with the RBI.
  • A. 1 only
  • B. 1 and 2 only
  • C. 2 and 3 only
  • D. 1, 2 and 3

Q10. With reference to central counterparties (CCPs) and their regulation in India, which of the following are correctly identified?

  1. In India's securities markets, clearing corporations are recognised as Qualified Central Counterparties by SEBI.
  2. CCIL, which clears government securities and foreign-exchange trades, is regulated by the Reserve Bank of India.
  3. A central counterparty eliminates counterparty credit risk by interposing itself between the buyer and the seller through novation.
  4. Under RBI norms, an entity seeking authorisation as a central counterparty must be a partnership firm with a minimum net worth of Rs 100 crore.
  • A. 1 and 2 only
  • B. 1, 2 and 3
  • C. 2, 3 and 4
  • D. 1, 3 and 4

Q11. With reference to the 16th India-EU Summit of January 2026 and the India-EU Free Trade Agreement concluded at it, consider the following statements. Which of the statements given above is/are correct?

  1. The India-EU Free Trade Agreement was concluded at the 16th India-EU Summit held during the January 2026 State Visit.
  2. The European Union was represented at the summit by the President of the European Council and the President of the European Commission.
  3. Under the concluded agreement, the EU secured duty-free market access for over 99% of its own exports by value to the Indian market.
  • A. 1 only
  • B. 1 and 2 only
  • C. 2 and 3 only
  • D. 1, 2 and 3