Clerk to Scale I Promotion Exam MCQs — 50 Questions with Answers (2026)
Fifty practice questions for the clerk to Scale I (JMGS-I) promotion exam in public sector banks, with answers and explanations. They are taken from the chapters of our Clerk → Scale I course and cover the areas the written test draws on: banking law, advances and credit, government schemes, deposits and KYC, RBI policy and priority sector lending, digital banking, foreign exchange, computers in banking and banking committees.
Try each question before opening Show answer, and keep count of your correct answers. The answer keys are spread across A, B, C and D, so guessing the same letter won’t get you far.
- Advances & Credit (Q1–11)
- Banking Law & Regulation (Q12–19)
- Government Schemes & Financial Inclusion (Q20–26)
- Deposits, KYC & Customer Service (Q27–31)
- RBI Policy & Priority Sector Lending (Q32–35)
- Digital Banking & Payments (Q36–39)
- Foreign Exchange & Trade Finance (Q40–43)
- Computers & IT in Banking (Q44–47)
- Banking Committees (Q48–50)
Advances & Credit — Questions 1–11
Q1. Which of the following is a NON-FUNDED credit facility?
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Answer: C) Letter of Credit
Letter of Credit is non-funded — no immediate cash outflow. The bank pays only when conforming documents are presented. Term Loan, CC, and OD are all funded facilities.
Q2. In a Pledge, the possession of goods is transferred to:
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Answer: A) The pawnee (bank)
In pledge, possession of goods is transferred to the pawnee (bank/creditor). The pawnor (borrower) retains ownership but delivers possession.
Q3. Which of the following is a separate legal entity distinct from its members?
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Answer: D) Private Limited Company
A Private Limited Company is a separate legal entity. Proprietorship, Partnership, and HUF are not separate legal entities — they are legally identified with their owners/members.
Q4. Which of the following is NOT one of the 5 Cs of Credit?
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Answer: D) Compliance
The 5 Cs are Character, Capacity, Capital, Collateral, and Conditions. Compliance is not one of them.
Q5. The Turnover Method of working capital assessment was recommended by which committee?
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Answer: B) Nayak Committee
The Nayak Committee recommended the Turnover Method. The Tandon Committee recommended the MPBF method.
Q6. For a short-duration crop loan (e.g., wheat), NPA is triggered after how many crop seasons of overdue?
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Answer: B) 2 crop seasons
Short-duration crop loans become NPA after 2 crop seasons of overdue — not the 90-day rule.
Q7. A term loan account where principal is overdue for 45 days is classified as:
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Answer: B) SMA-1
SMA-1 covers 31 to 60 days overdue. 45 days falls in this range.
Q8. Under the MSMED Act, 2006, delayed payment by a buyer to an MSME supplier (beyond the permissible period) attracts compound interest at:
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Answer: C) 3× the bank rate
Section 15 of the MSMED Act requires payment within 45 days. Under Section 16, a buyer who pays late owes compound interest at three times the bank rate notified by RBI.
Q9. The Scale of Finance for KCC is fixed by:
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Answer: D) District Level Technical Committee (DLTC)
Scale of Finance is fixed by the DLTC — which includes bank, agriculture department, and district administration representatives.
Q10. The maximum LTV ratio for a home loan of ₹25 lakh is:
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Answer: D) 90%
Home loans up to ₹30 lakh: maximum LTV = 90%. Borrower must contribute minimum 10%.
Q11. Under bancassurance, a bank distributes insurance products in the capacity of:
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Answer: A) Corporate Agent
Banks distribute insurance as Corporate Agents — licensed by IRDAI. They do not underwrite insurance.
Banking Law & Regulation — Questions 12–19
Q12. The Statutory Liquidity Ratio (SLR) is governed by which section and which Act?
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Answer: A) Section 24 of BR Act, 1949
SLR is under Section 24 of the Banking Regulation Act. CRR is under Section 42 of the RBI Act — tested every year.
Q13. The ₹1 currency note in India is issued by:
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Answer: C) Ministry of Finance, Government of India
The ₹1 note is issued by the Ministry of Finance and bears the Finance Secretary’s signature, not the RBI Governor’s.
Q14. Under Section 138 of the Negotiable Instruments Act, 1881, dishonour of a cheque is a criminal offence punishable by imprisonment of up to:
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Answer: C) 2 years
Section 138 provides for imprisonment up to 2 years and/or a fine up to twice the cheque amount.
Q15. A contract entered into by a minor is:
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Answer: A) Void ab initio
A minor’s contract is void ab initio — null from the very beginning. It cannot be ratified on attaining majority.
Q16. Under Section 13(2) of the SARFAESI Act, 2002, what is the notice period given to a borrower after an account is classified as NPA?
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Answer: C) 60 days
Section 13(2) requires the secured creditor to give a 60-day demand notice before taking any action on the secured asset.
Q17. Under the Limitation Act, 1963, what is the limitation period for a bank (mortgagee) to file a suit to enforce a mortgage?
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Answer: C) 12 years
A mortgagee (bank) must enforce the mortgage within 12 years from the date the secured money becomes due.
Q18. What are the three stages of money laundering in the correct sequence?
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Answer: D) Placement → Layering → Integration
Money laundering follows: Placement (introducing dirty money) → Layering (obscuring the trail) → Integration (re-entering clean economy).
Q19. In a locker facility, the bank’s relationship with the customer is that of:
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Answer: A) Lessor and Lessee
A locker is a rental arrangement — the bank is the lessor and the customer is the lessee. The bank does not know the locker contents and is NOT a bailee of those contents.
Government Schemes & Financial Inclusion — Questions 20–26
Q20. NABARD (National Bank for Agriculture and Rural Development) was established in:
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Answer: C) 1982
NABARD was established on July 12, 1982 under the NABARD Act, 1981. It is the apex development finance institution for agriculture and rural development in India. It was carved out from RBI’s agricultural credit department.
Q21. ECLGS (Emergency Credit Line Guarantee Scheme) was launched as part of which government initiative?
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Answer: C) Aatmanirbhar Bharat Package — COVID-19 relief
ECLGS was announced in May 2020 as part of the Aatmanirbhar Bharat economic relief package during the COVID-19 pandemic. It provided emergency additional working capital to MSMEs and businesses severely impacted by lockdowns and revenue disruption.
Q22. Under PM Mudra Yojana, the “Kishor” category covers loans in the range of:
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Answer: B) ₹50,001 to ₹5 lakh
The three PMMY categories: Shishu = up to ₹50,000; Kishor = ₹50,001 to ₹5 lakh; Tarun = ₹5 lakh to ₹10 lakh. Tarun Plus (₹10–₹20 lakh) is for successful Tarun repayers only.
Q23. Which category of enterprises is NOT covered under CGTMSE?
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Answer: D) Medium enterprises
CGTMSE covers only Micro and Small Enterprises. Medium Enterprises are explicitly excluded from CGTMSE coverage. This is a common exam trap — the “MSE” in CGTMSE stands for Micro and Small Enterprises, not MSME.
Q24. Pradhan Mantri Jan Dhan Yojana (PMJDY) was launched on:
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Answer: A) August 28, 2014
PMJDY was officially launched on August 28, 2014. PM Modi announced it on Independence Day (August 15, 2014), but the formal launch and account opening drive began on August 28. This distinction matters — many students confuse the announcement date (Aug 15) with the launch date (Aug 28). PMJDY accounts set a Guinness World Record for the most bank accounts opened in one week during its launch.
Q25. A Joint Liability Group (JLG) typically consists of:
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Answer: B) 4–10 members
A JLG typically has 4 to 10 members. They form a group where each member guarantees the others’ loans — no collateral is required because the mutual guarantee acts as the security. This is distinct from an SHG (Self-Help Group), which has 10–20 members and includes a compulsory savings component before accessing external bank credit.
Q26. Startup India was launched on:
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Answer: C) January 16, 2016
Startup India was launched on January 16, 2016 by Prime Minister Modi at Vigyan Bhavan, New Delhi. This is a high-frequency exam date. Make in India was launched earlier on September 25, 2014. Stand Up India came after on April 5, 2016. The chronological order: Make in India (Sep 2014) → Startup India (Jan 2016) → Stand Up India (Apr 2016).
Deposits, KYC & Customer Service — Questions 27–31
Q27. A deposit account is classified as inoperative/dormant if there is no customer-induced transaction for:
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Answer: B) 2 years
An account becomes inoperative/dormant after 2 consecutive years without a customer-induced transaction; reactivation then requires fresh KYC. This is different from the 10-year threshold for transfer to the DEA Fund.
Q28. How often must KYC be updated for a HIGH-RISK customer?
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Answer: B) Every 2 years
High-risk customers require Re-KYC every 2 years. Medium-risk: 8 years; Low-risk: 10 years.
Q29. What is the legal status of a nominee in a bank deposit account?
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Answer: B) Trustee for the legal heirs
A nominee is a trustee — the bank pays the nominee for administrative ease, but the nominee holds the funds for the benefit of the legal heirs.
Q30. What is the current deposit insurance limit provided by DICGC?
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Answer: C) ₹5 lakh
The deposit insurance limit is ₹5 lakh per depositor per bank (raised from ₹1 lakh in February 2020).
Q31. As per RBI’s revised locker guidelines (2021), the minimum liability of a bank for loss of locker contents is:
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Answer: A) 100 times the annual locker rent
RBI’s revised locker guidelines (August 2021, in force from 1 January 2022) set the bank’s liability for loss or damage to locker contents — from fire, theft, burglary or similar events — at 100 times the annual locker rent.
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See the Clerk → Scale I course →RBI Policy & Priority Sector Lending — Questions 32–35
Q32. CRR balances maintained by banks with RBI earn:
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Answer: D) No interest
RBI pays NO interest on CRR balances. This is a pure cost to banks.
Q33. CRR is maintained by banks:
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Answer: A) With RBI in a current account
CRR is maintained with RBI in a current account (cash). SLR is maintained by the bank itself.
Q34. What is the overall Priority Sector Lending (PSL) target for domestic scheduled commercial banks?
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Answer: B) 40% of ANBC or CEOBE, whichever is higher
Domestic SCBs must direct 40% of ANBC or Credit Equivalent of Off-Balance Sheet Exposures (CEOBE), whichever is higher, to priority sectors.
Q35. What is the agriculture sub-target under PSL for domestic scheduled commercial banks?
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Answer: C) 18% of ANBC
Agriculture sub-target is 18% of ANBC, of which at least 8% must go to Small & Marginal Farmers.
Digital Banking & Payments — Questions 36–39
Q36. NEFT settlement takes place in:
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Answer: D) Half-hourly batches throughout the day
NEFT settles in half-hourly batches — there are 48 settlement cycles in a day. Funds are credited to the beneficiary in the next available batch after the transfer is initiated.
Q37. As per RBI guidelines, contactless (NFC) card payments can be made without entering a PIN up to:
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Answer: B) ₹5,000
RBI allows contactless (tap-and-pay) transactions without PIN entry up to ₹5,000 per transaction. For amounts above ₹5,000, PIN entry is mandatory.
Q38. A fraudster uses a customer’s stolen OTP and password to access their account. Which IT Act section covers this identity theft?
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Answer: D) Section 66C
Section 66C specifically covers identity theft — dishonestly using another person’s electronic signature, password, or unique identification feature. Penalty: up to 3 years’ imprisonment and a fine of up to ₹1 lakh.
Q39. Which authentication method does AEPS use?
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Answer: B) Aadhaar number + biometric (fingerprint or iris)
AEPS uses only the customer’s Aadhaar number and biometric authentication (fingerprint or iris scan). No debit card, PIN, or smartphone is required.
Foreign Exchange & Trade Finance — Questions 40–43
Q40. FEMA (Foreign Exchange Management Act) came into force on:
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Answer: C) June 1, 2000
FEMA was enacted (signed into law) on December 29, 1999, but came into force on June 1, 2000 — the same date FERA (1973) was repealed. The gap between enactment and coming into force allowed India time to prepare the regulatory framework. Exams often test both dates: enactment (Dec 29, 1999) and commencement (June 1, 2000).
Q41. When a resident Indian leaves for employment abroad and becomes an NRI under FEMA, their existing savings account in India should be:
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Answer: A) Redesignated as an NRO account
When a resident Indian becomes an NRI (under FEMA), their existing savings/current accounts must be REDESIGNATED as NRO accounts — not closed, not converted to NRE. The NRO account then serves for Indian income like rent, pension, dividends. A new NRE account must be separately opened for foreign earnings. Maintaining a regular savings account as a non-resident is a FEMA violation.
Q42. Under UCP 600, all Letters of Credit are:
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Answer: D) Irrevocable by default — revocable LCs are eliminated
UCP 600 eliminated revocable LCs. Under UCP 600, all documentary credits are irrevocable by default — they cannot be cancelled or amended without the consent of the issuing bank, confirming bank (if any), and the beneficiary. Under the earlier UCP 500, LCs had to specifically state “irrevocable” — the default was debatable. UCP 600 ended this ambiguity.
Q43. A Performance Bank Guarantee (PBG) is used to:
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Answer: B) Guarantee that the applicant will fulfil their contractual performance obligations (delivery, project completion)
Performance BG guarantees that the applicant will complete the project, deliver goods, or meet service levels as specified in the contract. It is invoked when the contractor fails to perform. Common in government infrastructure projects, EPC contracts, and large supply orders. Typically 5–10% of contract value. Customs duty guarantee and deferred payment guarantee are both Financial BGs.
Computers & IT in Banking — Questions 44–47
Q44. Finacle, the Core Banking Solution, is a product of:
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Answer: B) Infosys
Finacle is developed by Infosys. It is used by many large PSBs including PNB, Canara Bank, and Bank of Baroda. TCS develops BaNCS (used by SBI); Oracle develops Flexcube.
Q45. Which type of backup copies only the data that has changed since the last full backup?
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Answer: B) Differential backup
Differential backup copies all data that has changed since the last full backup. Incremental backup copies only changes since the last backup (whether full or incremental).
Q46. A network that is private and accessible only to the bank’s own employees is called:
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Answer: A) Intranet
An Intranet is a private internal network accessible only to an organisation’s employees. The bank’s CBS, HR portal, and internal circulars are hosted on the Intranet. An Extranet extends limited access to trusted external parties like auditors.
Q47. FIU-India (Financial Intelligence Unit India) functions under which ministry?
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Answer: C) Ministry of Finance
FIU-India functions under the Ministry of Finance (not RBI). It receives CTRs and STRs from banks and other reporting entities, analyses financial intelligence, and shares information with enforcement agencies like the Enforcement Directorate (ED), CBI, and Income Tax Department.
Banking Committees — Questions 48–50
Q48. Narasimham Committee I (1991) is formally known as:
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Answer: D) Committee on the Financial System
Narasimham Committee I (1991) is formally called the “Committee on the Financial System” — chaired by M. Narasimham, former RBI Governor. It was set up in the context of the 1991 economic liberalisation. Narasimham Committee II (1998) is called “Committee on Banking Sector Reforms.” The two committees have different formal names — a common exam trap.
Q49. The Urjit Patel Committee (2013–14) recommended adopting which inflation measure as the primary monetary policy target?
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Answer: A) CPI (Consumer Price Index) at 4% (±2%)
The Urjit Patel Committee recommended switching from WPI to CPI as the primary inflation target, with a target of 4% (±2% band). This was adopted through the Monetary Policy Framework Agreement between RBI and Government in 2015, and then formalised when the RBI Act was amended in 2016 to constitute the Monetary Policy Committee (MPC). India now has a statutory 4±2% CPI inflation target.
Q50. Which committee recommended the establishment of IRDA (Insurance Regulatory and Development Authority)?
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Answer: A) Malhotra Committee
The Malhotra Committee (1994), chaired by R.N. Malhotra (former RBI Governor), recommended opening the insurance sector to private players and establishing an independent insurance regulator — which became IRDA. IRDA was formally established in 1999, and private insurance companies began operations from 2000. Narasimham committees dealt with banking; Vaghul with money market.
How Did You Do?
Each question here comes from a chapter of the course, where the topic is covered in full alongside 15 or more practice questions. If a section cost you more marks than the others, that is the place to start your revision. The Clerk to Scale I syllabus guide lists every topic in the exam.
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