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JAIIB IE&IFS Unit 20 — Indian Financial System: An Overview: Free MCQs with Explanations

By Swarnakshi Jha (ex-banker) · Updated 20 September 2026 · Paper 1 of the November 2026 cycle (1 November 2026)

This page is a free slice of our JAIIB IE&IFS question bank for Unit 20 — Indian Financial System: An Overview (Module C — Indian Financial Architecture). The Mock Centre holds 57 questions on this unit alone, every one with a why-right / why-wrong explanation; below are the facts examiners keep returning to, five of those questions to try, and the traps that cost marks.

IE&IFS · Module C57 MCQs in the Mock Centre5 free belowPaper on 1 November 2026

Key facts examiners test from this unit

  1. Core function: surplus→deficit transfer; informal (moneylenders/chit funds/relatives — cheap, unregulated) vs formal (institutions + instruments + markets); four market segments — money/ forex/capital/insurance.
  2. Institution classes: banking (deposit-taking) vs non-banking; regulatory (RBI/SEBI/IRDA) vs intermediaries vs non-intermediates (NABARD/SIDBI).
  3. History: Arthashastra (4th c. BC); Bank of Hindustan 1770 (first commercial); Presidency banks 1806/1840/1843 → Imperial 1921 → SBI 1-7-1955 (first PSB); BSE 1875 (Asia's first); RBI 1935 (Hilton Young); DIR forex control 3-9-1939; National Insurance 1906.

5 free practice questions — tap an option

Five basic questions from this unit. Answers lock on the first tap, exactly as in the exam, and a short explanation opens underneath. The Mock Centre adds the moderate and tough questions, why every other option is wrong, the concept capsule and the exam tip — with your score and revision dates tracked.

Question 1 of 5
The financial system's CORE function is:
Why (b): The financial system's CORE function: moving CAPITAL FROM SAVERS TO INVESTORS — surplus households funding deficit enterprises through intermediaries.
Question 2 of 5
The two basic types of financial systems:
Why (b): The two basic financial systems: INFORMAL (moneylenders, chit funds — unregulated) and FORMAL (banks, markets — regulated).
Question 3 of 5
The formal system's three components:
Why (b): The formal system's three components: FINANCIAL INSTITUTIONS, FINANCIAL INSTRUMENTS AND FINANCIAL MARKETS — the players, the products and the places.
Question 4 of 5
Part of the financial system:
Why (d): The financial system comprises ALL of them — markets, instruments and institutions together.
Question 5 of 5
The SECOND nationalisation:
Why (b): The SECOND nationalisation took over 6 BANKS ON 16 APRIL 1980 — those with deposits above ₹200 crore.
0 of 5 answered.

Traps in this unit

Confusable AConfusable BThe difference
InformalFormalUnregulated/cheap vs regulated triad
RegulatoryNon-intermediatesRBI/SEBI/IRDA vs NABARD/SIDBI
Practise all 57 questions on Unit 20. The free demo opens a slice of every subject with the same explanations; the IE&IFS Online-only pass unlocks all 3,032 IE&IFS questions, the full and module mocks, Smart Revision and the Readiness Score for one year (₹1,299). Not sure where you stand? Take the free 10-question test first.
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Independent study aid — not affiliated with, endorsed by, or sponsored by the Indian Institute of Banking & Finance (IIBF). Exam pattern, dates, fees and passing criteria are set by IIBF — always confirm the current rules at iibf.org.in. Regulatory figures verified as of September 2026; verify from official sources before relying on them in practice.