NTA UGC NET/JRF Exam, January 2025 (Commerce)

Total Questions: 100

91. Read the following passage carefully and answer the questions based on it:

The first phase of modern banking in India began after independence in 1947, when the government nationalized the major banks and introduced various reforms to promote financial inclusion and social welfare. The second phase started in the 1990s, when the liberalization of the economy and the advent of technology enabled the emergence of new private and foreign banks, offering competitive and innovative products and services to the customers. In the 2000s, the third phase commenced when the Internet and mobile penetration increased, leading to the rise of online and mobile banking, as well as the entry of Non-Banking Financial Companies (NBFCs) and fintech startups, offering digital solutions to cater to the unbanked and underbanked segments of the population.

The fourth and current phase of banking in India is characterized by the emergence of neo banks, which are digital-only banks that operate without physical branches and offer a range of banking and financial services through mobile apps and web platforms. Neo banks often function by partnering with licensed banks to provide their services to customer. While the digital banking landscape in India is evolving rapidly, there are still many challenges and gaps that need to be addressed. One of the major challenges is the lack of standardization and interoperability among the various players, platforms, and systems in the ecosystem. For instance, there are multiple payment methods, such as UPI, IMPS, NEFT, RTGS, cards, wallets and QR codes, each with its own features, limitations and charges. This creates confusion and inconvenience for customers, who have to switch between different apps and interfaces to make payments and access their accounts.

Artificial Intelligence (AI) is a potent technology that can help digital banks to overcome the challenges and gaps mentioned above, and add value to their customers and stakeholders. AI can enable digital banks to leverage data and analytics, machine learning, natural language processing, computer vision, and other advance techniques to automate and enhance various banking processes, such as customer identification and verification, customer service and support, product recommendation and cross-selling, fraud detection and risk management, credit scoring and underwriting, and regulatory compliance and reporting.
 What is the primary focus of neo banks in India?

Correct Answer: B. Catering to the unbanked and underbanked segments
Solution:Neo banks in India primarily focus on digital-only banking services, targeting unbanked and underbanked populations through mobile apps and web platforms. Unlike traditional banks, they do not operate physical branches and instead partner with licensed banks to provide services such as savings accounts, loans, and digital payments. This helps in increasing financial inclusion and reaching customers who have limited or no access to traditional banking.

92. What is one of the major challenges in the digital banking landscape in India?

Correct Answer: C. Lack of standardization and interoperability
Solution:One of the major challenges in India's digital banking landscape is the lack of uniformity and interconnectivity between different banking systems, platforms, and payment methods such as UPI, NEFT, IMPS, RTGS, wallets, and QR codes. This creates confusion and inconvenience for customers, as they need to switch between multiple apps and payment interfaces. Ensuring interoperability across all digital banking services would improve customer experience and efficiency.

93. How can artificial intelligence (AI) help digital banks to overcome challenges?

Correct Answer: C. By providing advanced analytics
Solution:Artificial Intelligence (AI) can help digital banks overcome challenges by using data analytics, machine learning, and automation to enhance banking operations. AI-driven solutions can optimize customer identification and verification, fraud detection, credit scoring, risk management, and personalized product recommendations. By analyzing large volumes of data, AI improves efficiency, reduces operational costs, and enhances customer experience in digital banking.

94. What marked the beginning of the second phase of modern banking in India?

Correct Answer: B. Liberalization of the economy
Solution:The second phase of modern banking in India began in the 1990s with the liberalization of the economy, which led to the entry of new private and foreign banks. This phase introduced competitive and innovative banking products and services, increasing customer choice and improving banking efficiency. The reforms during this period encouraged technology adoption and modernized the financial sector.

95. What is consequence of the lack of standardization and interoperability in the digital banking ecosystem?

Correct Answer: C. Confusing and inconvenience for costumers
Solution:The lack of standardization and 98. interoperability in India's digital banking ecosystem results in confusion and inconvenience for customers. Different payment methods such as UPI, NEFT, IMPS, RTGS, wallets, and QR codes have their own rules, limitations, and charges, making transactions more complicated. Customers often have to use multiple apps and interfaces to complete transactions, reducing the ease and efficiency of digital banking.

96. Read the following passage carefully and answer the questions based on it:

The major source for the revenue for the government is indirect tax. The Central Board of Indirect Taxes and Customs (CBIC) (erstwhile Central Board of Excise and Customs) is the apex regulatory body that supervises the levy and administration of Indirect Taxes in India. CBIC is a part of the Department of Revenue under the Ministry of Finance, Government of India. It deals with the tasks of formulation of policy concerning levy and collection of customs, Central Excise duties, Central Goods & Services Tax and IGST, prevention of smuggling and administration of matter relating to customs, Central Excise, Central Goods & Services Tax (CGST), IGST and narcotics to the extent under CBIC's purview.

The board is the administrative authority for its subordinate organizations, including Custom Houses, Central Excise and Central GST Commissionerate's and the Central Revenue Control Laboratory In recent years, the Indian government has undertaken significant reforms under the indirect taxation system. This includes the implementation of Goods and Services Tax (GST). Goods and Services Tax (GST) is an indirect tax that has replaced many indirect taxes in India. The Goods and Services Tax Act was passed in the Parliament on March 29, 2017.
This Act came into effect on July 01, 2017. GST is a destination based tax on consumption with credit of taxes paid at previous stages available as set-off. In nutshell, only value addition will be taxed and the burden of tax is to be borne by the final consumer.

Destination based tax on consumption means the tax would accrue to the taxing authority which has jurisdiction over the place of consumption which is also termed as place of supply. GST has removed the cascading effect of taxes. This cascading effect implies charging tax on tax. In other words, at the time of levy of tax, the total value is considered which is inclusive of all taxes paid up to the points. In this manner, if the tax is always charged on the selling price of the products, the burden of tax keeps on increasing at each point of sales. In this process, the effect of taxation magnifies as at each level tax is calculated on value, which includes taxes already levied and paid. The charging of tax on tax is called the 'Cascading Effect of Tаx'.
Who bears the burden of tax in the GST system?

Correct Answer: C. Final Consumer
Solution:In the GST system, the final consumer bears the burden of tax. GST is a destination-based tax, meaning it is levied at the place of consumption rather than the place of production. Businesses such as manufacturers, wholesalers, and retailers act as intermediaries who collect GST from buyers and pass it to the government, ensuring that only the value addition at each stage is taxed. The system eliminates the cascading effect, making tax payment fairer and reducing double taxation.

97. How does GST eliminate the cascading effect of taxes?

Correct Answer: C. By allowing tax credit on previous stages
Solution:GST eliminates the cascading effect of taxes by allowing businesses to claim Input Tax Credit (ITC) on the tax paid at previous stages.
Input Tax Credit (ITC) allows businesses to deduct the tax they have already paid on purchases from the tax they owe on sales, ensuring that tax is only paid on the value added at each stage.
This avoids "tax on tax", reduces the overall tax burden, and makes the system more efficient and transparent.

98. Which department oversees the administration of matters related to custom, central excise, Central Goods & Services Tax (CGST), (IGST), and narcotics under the Indian government?

Correct Answer: D. Department of Revenue
Solution:The Department of Revenue, under the Ministry of Finance, Government of India, oversees the administration of customs, central excise, Central GST (CGST), Integrated GST (IGST), and narcotics. The Central Board of Indirect Taxes and Customs (CBIC), a part of the Department of Revenue, is responsible for enforcing indirect tax laws and policies. CBIC handles policy formulation, implementation, and compliance to ensure smooth tax collection and prevent tax evasion.

99. What does the term "cascading effect of taxes" refer to?

Correct Answer: C. Charging tax on tax
Solution:The cascading effect of taxes refers to charging tax on tax, which results in an increase in the total tax burden at each stage of the supply chain. Before GST, indirect taxes such as excise duty, VAT, and service tax were applied at different levels, leading to a higher cost of goods and services. GST eliminates this issue by ensuring that tax is only levied on the value addition at each stage.

100. What is the significance of the term "destination - based tax" in the context of GST?

Correct Answer: D. Tax accrues to the taxing authority at the place of consumption.
Solution:GST is a destination-based tax, meaning the revenue is collected by the state where the goods or services are consumed. This contrasts with the origin-based tax system, where tax is levied at the place of production. The place of supply determines which government (state or central) gets the tax revenue, ensuring a fair distribution of tax collection.