UPSC Essentials brings to you its initiative of subject-wise quizzes. These quizzes are designed to help you revise some of the most important topics from the static part of the syllabus. Attempt today’s subject quiz on the Economy to check your progress. Click Here to read the UPSC Essentials magazine for March 2026. Share your views and suggestions in the comment box or at manas.srivastava@indianexpress.com1. It is the interest rate, which the central bank pays to the commercial banks when they park their excess cash.2. When the central bank does not change the repo rate, then loans and small businesses — are expected to remain stable.Which of the statements given above is/are correct?(a) 1 only(b) 2 only(c) Both 1 and 2(d) Neither 1 nor 2Relevance: The repo rate is a key monetary policy instrument. It is frequently in the news during Monetary Policy Committee (MPC) announcements, making it highly relevant for current affairs-based questions in UPSC Prelims. Aspirants should also be aware about other terms like reverse repo rate, MLR, CRR, SRR and more.Explanation— People go to commercial banks either to deposit their savings or to get a loan. On savings/deposits, the bank pays interest to the depositor while on loans, it charges interest to the borrower. Typically, the interest rate banks charge on loans is higher than the interest they pay on deposits.Story continues below this ad— A key deciding factor — although not the only one — is the interest rates that commercial banks themselves pay (or get) when they borrow (or deposit) money from (or in) the RBI. The interest rate that the RBI charges when commercial banks borrow money from it is called the repo rate. The interest rate the central bank pays commercial banks when they park their excess cash is called the reverse repo rate. Hence, statement 1 is not correct.— Keeping the policy rate unchanged at 5.25% would come as a significant relief for borrowers across various segments of the economy. When the central bank maintains the current rate, it generally means that lending rates offered by banks and financial institutions are unlikely to rise in the near term. As a result, equated monthly instalments (EMIs) on loans — homes, vehicles, personal needs, corporate financing or small businesses — are expected to remain stable. Hence, statement 2 is correct.Therefore, option (b) is the correct answer.QUESTION 2With reference to the limits for FPI investment in India, consider the following pairs:1. Government Securities (G-Secs) – 20 per cent2. State Government Securities (SGSs) – 10 per cent3. Corporate bonds – 15 per centHow many of the pairs given above are correctly marked?(a) Only one pair(b) Only two pairs(c) All three pairs(d) None of the above pairsStory continues below this adRelevance: The limits on Foreign Portfolio Investment (FPI) are crucial for understanding capital flows, external sector stability, and debt market regulations. It is important for UPSC Prelims as it integrates static concepts with current affairs related to government securities.Explanation— The RBI said the limits for FPI investment in Government Securities (G-Secs), State Government Securities (SGSs) and corporate bonds will remain unchanged at 6%, 2% and 15% respectively, of the outstanding stocks of securities for FY27 for the general route. Hence, pairs 1 and 2 are not correctly marked and pair 3 is correctly marked.Therefore, option (a) is the correct answer.QUESTION 3With reference to the opening of new branches for a bank, consider the following statements:1. It is governed by the provisions of the Banking Regulation Act, 1949.Story continues below this ad2. Banks do not require prior permission from the RBI for opening a new branch of the bank.Which of the statements given above is/are correct?(a) 1 only(b) 2 only(c) Both 1 and 2(d) Neither 1 nor 2Relevance: The topic is important for understanding banking regulations. It highlights the regulatory and supervisory role of the Reserve Bank of India in branch licensing, financial stability, and financial inclusion. Aspirants can expect questions on basic concepts of the banking regulations.Explanation— The opening of new branches and shifting of existing branches of banks is governed by the provisions of Section 23 of the Banking Regulation Act, 1949. Hence, statement 1 is correct.— In terms of these provisions, banks cannot, without the prior approval of the Reserve Bank of India (RBI), open a new place of business in India or abroad or change, otherwise than within the same city, town or village, the location of the existing place of business. Hence, statement 2 is not correct.Story continues below this ad— Section 23 (2) of the Banking Regulation Act lays down that before granting any permission under this section, the Reserve Bank may require to be satisfied, by an inspection under Section 35 or otherwise, as to the financial condition and history of the banking company, the general character of its management, the adequacy of its capital structure and earning prospects and that public interest will be served by the opening or, as the case may be, change of location of the existing place of business.Therefore, option (a) is the correct answer.(Source: http://www.rbi.org.in)QUESTION 4With reference to the Gini coefficient, consider the following statements:1. The Gini coefficient can take negative values to indicate extreme equality in income distribution.2. A higher Gini coefficient indicates a more equal distribution of income or wealth within a population.Which of the statements given above is/are correct?(a) 1 only(b) 2 only(c) Both 1 and 2(d) Neither 1 nor 2Story continues below this adRelevance: The Gini Coefficient is a key indicator used to assess income and wealth inequality, making it an important concept in the Economy section of UPSC Prelims. Students can expect questions on such terms especially in the context of inclusive growth, welfare schemes, and economic surveys.Explanation— Land ownership in rural India is highly concentrated with the top 10% of households owning 44% of total land area even as about 46% of households are landless, according to a working paper released by the Paris-based World Inequality Lab.— The paper draws its findings from the Socio-Economic Caste Census conducted in 2011, which covered 650 million individuals from 270,000 villages across ten of the largest states of India — Punjab, Uttar Pradesh, Bihar, Rajasthan, Madhya Pradesh, Maharashtra, Karnataka, Tamil Nadu, Kerala, and West Bengal — accounting for approximately 75% of the rural population.— As per the all-household Gini measure, Kerala has the highest Gini coefficient at 90, followed by Bihar, Punjab, Tamil Nadu and West Bengal, each with a Gini coefficient of around 80. Karnataka and Rajasthan have the lowest Gini coefficient of below 65, the paper stated. A lower Gini coefficient indicates a more equal distribution of income or wealth within a population, meaning a smaller gap between the rich and poor. Hence, statement 2 is not correct.Story continues below this ad— The Gini Coefficient ranges from 0 to 1 (or 0 to 100 when expressed as a percentage). It does not take negative values under standard measurement. Hence, statement 1 is not correct.Therefore, option (d) is the correct answer.QUESTION 5The Investment Facilitation for Development (IFD) Agreement comes under:(a) World Bank(b) International Monetary Fund(c) European Bank for Reconstruction and Development(d) World Trade OrganisationRelevance: IFD Agreement can be highly relevant for UPSC Prelims due to its connection with global trade and international economic governance. It highlights the growing importance of plurilateral agreements, transparency in investment procedures, and ease of doing business.Explanation— The rapid expansion of support for the China-backed Investment Facilitation for Development (IFD) Agreement at the World Trade Organisation (WTO) has left India at risk of political isolation ahead of a key global meeting next week.Story continues below this ad— Set to be held in the Central African nation of Cameroon, the 14th Ministerial Conference begins on March 26. It will include a request to incorporate the IFD Agreement into the Marrakesh Agreement, which led to the WTO’s formation in 1995.What is the IFD agreement?— On the face of it, the agreement aims to improve the investment climate and promote international cooperation to facilitate the flow of foreign direct investment among WTO members. In particular, it focuses on developing and Least-Developed Countries (LDCs) and fostering sustainable development. It focuses on Foreign Direct Investment (FDI).Therefore, option (d) is the correct answer.Previous Daily Subject-Wise-QuizDaily Subject-wise quiz — History, Culture, and Social Issues (Week 152)Daily subject-wise quiz — Polity and Governance (Week 157)Daily subject-wise quiz — Science and Technology (Week 157)Daily subject-wise quiz — Economy (Week 156)Daily subject-wise quiz — Environment and Geography (Week 156)Daily subject-wise quiz – International Relations (Week 156)Subscribe to our UPSC newsletter and stay updated with the news cues from the past week.Stay updated with the latest UPSC articles by joining our Telegram channel – IndianExpress UPSC Hub, and follow us on Instagram and X.