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TNPSC banking, budget and taxation practice questions

By the PrepMatic team · Updated 9 Oct 2026 · 3 min read

Money, banking and taxes are the second half of the Indian economy part of Unit V. The questions are rarely numerical: TNPSC asks who set up an institution, when a reform happened, and which category a tax falls in. The five questions below follow that pattern. For the wider subject, see the TNPSC Indian Economy guide.

What this topic covers

• The banking structure: the Reserve Bank of India as the central bank, commercial banks, cooperative banks and development banks such as NABARD.
• Monetary policy: repo rate, reverse repo rate, Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR).
• Public finance: the Union Budget (Article 112), revenue and capital accounts, deficits.
• Taxes: the difference between direct and indirect taxes, and Goods and Services Tax (GST).

India's financial year runs from 1 April to 31 March, and the Budget covers that year.

Sample questions

Question 1

The Reserve Bank of India began its operations in:

• A. 1921
• B. 1935
• C. 1949
• D. 1969

Question 2

How many major commercial banks were nationalised in July 1969?

• A. 6
• B. 10
• C. 14
• D. 20

Question 3

The Goods and Services Tax (GST) came into effect in India on:

• A. 1 July 2017
• B. 1 April 2017
• C. 1 April 2018
• D. 26 January 2017

Question 4

Which of the following is a direct tax?

• A. Goods and Services Tax
• B. Customs duty
• C. Excise duty
• D. Income tax

Question 5

The rate at which the Reserve Bank of India borrows money from commercial banks is called the:

• A. repo rate
• B. reverse repo rate
• C. bank rate
• D. cash reserve ratio

Answers and explanations

1. B. The RBI began working on 1 April 1935 under the RBI Act, 1934. It was nationalised in 1949.
2. C. Fourteen major commercial banks were nationalised in July 1969. Six more were taken over in 1980.
3. A. GST began on 1 July 2017, after the 101st Amendment Act of 2016. It replaced a number of central and state indirect taxes.
4. D. Income tax is paid by the person who earns the income, so it is direct. GST, customs duty and excise duty are indirect because the burden passes to the buyer.
5. B. The reverse repo is the rate at which the RBI absorbs money from banks. The repo rate is the opposite: the rate at which the RBI lends to banks against securities. CRR is a ratio of deposits, not a rate.

How to prepare banking and taxation

Use two memory aids. First, a three-line timeline of banking: 1935 (RBI starts), 1949 (RBI nationalised), 1969 (14 banks nationalised). Add 1982 for NABARD and 1991 for the reforms, after which new private-sector banks were licensed. Second, a four-box grid for monetary policy: repo, reverse repo, CRR and SLR, with one line saying who lends or borrows and what the tool does to money supply.

For taxes, sort every tax you meet into direct or indirect before you read about it. This habit cuts most mistakes. The Budget also has a stable vocabulary: revenue receipts, capital receipts, revenue deficit, fiscal deficit. A glossary page of one line each is enough for Group 4 level.

Skip figures that change with each cycle, such as the current repo rate, tax slab rates or the size of the Budget. These are poor revision material because each new announcement outdates your notes, while the structure and the dates above stay fixed.

For the earlier concepts, begin with TNPSC Indian economy basics practice. After this page, TNPSC agriculture and industry practice completes the economy sequence.

Take the full topic test on PrepMatic

PrepMatic topic tests run for about 15 questions and 30 minutes. They fit between longer study sessions, so a banking round after lunch or on a weekday evening is realistic even if you are preparing alongside a job. The Basic plan is free and includes 5 topic tests, which is enough to try several General Studies topics.

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