UPSC Essentials | Daily subject-wise quiz : Economy MCQs on stablecoins, Consumer Price Index and more (Week 143)

3. Stablecoins are volatile and vulnerable to confidence shocks and structural fragilities.

How many of the statements given above are correct?

(a) Only one

(b) Only two

(c) All three

(d) None

Relevance: It is important for Prelims due to current debates on cryptocurrency regulation, financial stability, and RBI/BIS warnings, often asked through tricky statements. Also relevant in the context of digital finance, systemic risk, and comparison with CBDCs (Digital Rupee).

Explanation

— The Reserve Bank of India (RBI) warned that widespread adoption of stablecoins, or fiat-backed cryptocurrencies, could pose significant risks to the country’s monetary sovereignty and financial stability.

— The RBI has urged other countries to prioritise central bank digital currencies (CBDCs) over privately issued stablecoins to ensure financial stability.

— “The RBI maintains a cautious stance on crypto assets, including stablecoins, prioritising sovereign digital infrastructure to safeguard monetary sovereignty amid global shifts and preserve financial stability,” the RBI said in its Financial Stability Report (FSR).

— In their short history, stablecoins have proven to be volatile and vulnerable to confidence shocks and structural fragilities. Wider adoption of stablecoins can introduce new channels of financial stability risks, particularly during periods of market stress, it said. Hence, statement 3 is correct.

— Stablecoins are a type of cryptocurrency that maintains a steady value by being pegged to fiat currencies, commodities, or financial instruments, with the goal of providing a less volatile alternative to cryptocurrencies such as Bitcoin. Hence, statement 1 is correct.

— There are four main types of stablecoins: fiat-collateralized, commodity-backed, crypto-collateralized, and algorithmic. Each uses a different mechanism to keep prices stable; several may be found on big cryptocurrency exchanges.

— Stablecoins do not always use third-party auditors to verify their reserves. Some issuers provide audited reports or attestations, but they are neither required or universal. Hence, statement 2 is not correct.

Therefore, option (b) is the correct answer.

(Other Source: http://www.investopedia.com)

QUESTION 2

Consider the following statements:

1. The RBI allows a foreign bank to hold up to 20% in an Indian private sector bank under the automatic route.

2. The overall foreign investment cap in private banks is 99 per cent under India’s FDI policy.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Relevance: This questions tests precise knowledge of FDI limits, automatic vs approval routes, and promoter classification in banking, a frequent UPSC trap area.

Explanation

— The RBI allows a foreign bank to hold up to 20% in an Indian private sector bank under the automatic route, and up to 24.99% with the RBI approval without being classified as a promoter. Hence, statement 1 is correct.

— Any stake beyond 25% is treated as promoter shareholding and is subject to much stricter scrutiny, fit-and-proper norms and licensing conditions, even though the overall foreign investment cap in private banks is 74% under India’s FDI policy. Hence, statement 2 is not correct.

Therefore, option (a) is the correct answer.

QUESTION 3

With reference to the Banking Correspondent (BC), consider the following statements:

1. The total number of Banking Correspondent (BC) outlets — last-mile delivery agents providing banking services in remote and unbanked areas — has increased in FY25, from FY24 across the country.

2. The banking Correspondent framework has been steadily weakening, with sustainability becoming a major concern, particularly in rural and low-population areas.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Relevance: Banking Correspondents are part of financial inclusion and banking outreach, often asked through current-affairs–based factual statements using RBI data and trends. These questions test awareness of rural banking infrastructure, government schemes, and weakening institutional mechanisms.

Explanation

— The total number of Banking Correspondent (BC) outlets — last-mile delivery agents providing banking services in remote and unbanked areas — has declined by nearly 2.30 lakh to 13.10 lakh in FY25, from 15.47 lakh in FY24 across the country, according to RBI data. Hence, statement 1 is not correct.

— This marks a significant contraction in the rural banking footprint and raises fresh concerns over the sustainability of financial inclusion efforts. A majority of these closures have occurred in villages whose population exceeds 2,000, according to data from the Reserve Bank of India’s Trend and Progress of Banking in India report.

— The decline happened after the number of BCs spurted from 5.41 lakh in 2020 to 15.47 lakh in 2024. BCs in urban locations fell from 6.35 lakh in 2020 to 3.06 lakh in 2024 and remained marginally higher at 3.09 lakh in 2025, RBI data shows.

— Bankers said the BC framework has been steadily weakening, with sustainability becoming a major concern, particularly in rural and low-population areas. BCs largely depend on commissions that are often inadequate to meet routine operating expenses. Hence, statement 2 is correct.

Therefore, option (b) is the correct answer.

QUESTION 4

With reference to the Pressurised heavy-water reactors (PHWRs), consider the following statements:

1. They are said to be more suited to handling thorium than uranium.

2. India has the highest number of PHWRs operating worldwide.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Relevance: The questions test knowledge of nuclear reactor types (PHWRs), fuel cycle, and India’s three-stage nuclear programme, a recurring UPSC theme. It is linked to current affairs on nuclear energy expansion, thorium utilisation, and India’s indigenous reactor technology.

Explanation

— Indian policymakers have long considered thorium an alternative to uranium because it’s more abundant, produces lesser amounts of long-lived radioactive waste and potentially lowers the proliferation risk. India has little uranium reserves but abundant deposits of thorium, mostly on the beaches of Kerala and Odisha .

— The SHANTI Act opens the door for LWR-based imported reactors to be set up, leveraging existing PHWRs does present itself as an important diversification from the import risk.

(AP)

— Pressurised heavy-water reactors are said to be more suited to handling thorium because heavy water – an isotope of water that has an extra neutron on the hydrogen atom – absorbs fewer neutrons during the fission process, increasing the efficiency of the fission reaction by allowing more neutrons to be absorbed by the thorium. Hence, statement 1 is correct.

— Currently, there are over 45 PHWRs operating worldwide: 19 in India, 17 in Canada, three each in Argentina and South Korea, and two each in China and Romania, according to International Atomic Energy Agency data. Hence, statement 2 is correct.

Therefore, option (c) is the correct answer.

QUESTION 5

Which of the following are not a part of the current CPI series?

1. food and beverages

2. clothing and footwear

3. fuel and light

4. capital goods (machines, tools, factories)

5. Real estate prices/land prices

Select the correct answer using the codes given below:

(a) 1, 2 and 3

(b) 3, 4 and 5

(c) 2 and 4 only

(d) 4 and 5 only

Relevance: These questions are highly relevant for Prelims as UPSC frequently asks about components and exclusions of CPI.

Explanation

— The Statistics Ministry will make public the weights of each item that will be part of the new Consumer Price Index (CPI) basket before the first retail inflation data is released on February 12.

— The Classification of Individual Consumption According to Purpose — or COICOP — is the international reference framework and is endorsed by the United Nations Statistical Commission. In the new series, MoSPI will move to the latest version of the framework, or COICOP 2018

— The current CPI series has six groups — ‘food and beverages’, ‘pan, tobacco and intoxicants’, ‘clothing and footwear’, ‘housing’, ‘fuel and light’, and ‘miscellaneous’ — and 23 sub-groups. This classification will undergo a change in the new series, which will have 12 divisions, under which there will be 43 groups.

— Capital goods (machines, tools, factories) and Real estate prices/land prices are not covered under CPI currently.

Therefore, option (d) is the correct answer.

Previous Daily Subject-Wise-Quiz

Daily Subject-wise quiz — History, Culture, and Social Issues (Week 138)

Daily subject-wise quiz — Polity and Governance (Week 143)

Daily subject-wise quiz —  Science and Technology (Week 143)

Daily subject-wise quiz — Economy (Week 142)

Daily subject-wise quiz — Environment and Geography (Week 142)

Daily subject-wise quiz – International Relations (Week 142)

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