Read the following passage and answer the question :
A cashless society describes an economic state whereby financial transactions are not connected with money in the form of physical bank notes or coins but rather through the transfer of digital information between the transacting parties. In India Government has been consistently investing in various reforms for greater financial inclusion. During the last few years, initiatives such as Jan Dhan accounts, Aadhar enabled payment system, e-wallets, National Financial Switch and others have strengthened the Government resolve to go cashless. Today, financial inclusion is seen as a realistic dream.
Which among the following institutions is responsible for governing the cashless transactions ?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Central Bank (RBI)
Cashless payments move money from one account to another. The body that governs money and banks in India is its central bank, the Reserve Bank of India (RBI).
The RBI issues the currency of the country and controls the money supply. It also acts as a bank to the banking system. Commercial banks such as SBI, regional rural banks and foreign banks carry out payments for their customers. They work under the rules the RBI lays down.
Note 1: The passage of this question is taken almost word for word from the chapter ‘Money and Banking’ of the NCERT book. It is the paragraph on a cashless society. A short paragraph between two big topics deserves a careful read too. This one became a set of five questions.
Note 2: None of the NCERT books (2026-27, 2025-26, 2023-24 or pre-rationalised) says which body governs digital payments. In India, the Reserve Bank of India regulates the payment systems under the Payment and Settlement Systems Act, 2007.
NCERT (2026-27): “3.1 Functions of Money … Some countries have made an attempt to move towards an economy which use less of cash and more of digital transactions. A cashless society describes an economic state whereby financial transactions are not connected with money in the form of physical bank notes or coins but rather through the transfer of digital information (usually an electronic representation of money) between the transacting parties. In India government has been consistently investing in various reforms for greater financial inclusion. During the last few years’ initiatives such as Jan Dhan accounts, Aadhar enabled payment systems, e-Wallets, National financial Switch (NFS) and others have strengthened the government resolve to go cashless. Today, financial inclusion is seen as a realistic dream because of mobile and smart phone penetration across the country. Central bank Central Bank is a very important institution in a modern economy. Almost every country has one central bank. India got its central bank in 1935. Its name is the ‘Reserve Bank of India’. Central bank has several important functions. It issues the currency of the country. It controls money supply of the country through various methods, like bank rate, open market operations and variations in reserve ratios. It acts as a banker to the government. It is the custodian of the foreign exchange reserves of the economy. It also acts as a bank to the banking system, which is discussed in detail later.…” |