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The Reserve Bank of India issues all currency notes except:- a)500 Rupee note
- b)100 Rupee Note
- c)10 Rupee note
- d)1 Rupee note
Correct answer is 'D'. Can you explain this answer?
The Reserve Bank of India issues all currency notes except:
a)
500 Rupee note
b)
100 Rupee Note
c)
10 Rupee note
d)
1 Rupee note
|
Nandini Iyer answered |
Under Section 22 of the Reserve Bank of India Act, RBI has sole right to issue currency notes of various denominations except one rupee notes.
The One Rupee note is issued by Ministry of Finance and It bears the signatures of Finance Secretary, while other notes bear the signature of Governor RBI.
However RBI is the only source of legal tender money because distribution of one rupee notes and coins and small coins all over the country is undertaken by the Reserve Bank as agent of the Government.
Monitory policy is announced in India by _________- a)Ministry of Finance
- b)Reserve Bank of India
- c)Planning Commission
- d)Government
Correct answer is option 'B'. Can you explain this answer?
Monitory policy is announced in India by _________
a)
Ministry of Finance
b)
Reserve Bank of India
c)
Planning Commission
d)
Government
|
Poonam Reddy answered |
B: Reserve Bank of India
In India, monetary policy is announced by the Reserve Bank of India (RBI). The RBI is the central bank of India and is responsible for implementing and managing monetary policy in the country.
Monetary policy refers to the actions taken by the central bank to influence the supply and demand of money in the economy, with the aim of achieving certain macroeconomic objectives such as price stability, full employment, and economic growth. The RBI uses various tools, such as changing the interest rates, altering the reserve requirements for banks, and engaging in open market operations, to implement monetary policy in India.
The Ministry of Finance is responsible for managing the government's finances, including preparing the annual budget, mobilizing financial resources, and formulating fiscal policy. The Planning Commission is a government body that is responsible for formulating the country's five-year plans and for coordinating the development activities of various sectors of the economy. The government refers to the executive branch of government, which is responsible for implementing the policies and laws of the country.
Which of these is a Quantitative Method of Credit control?- a)Bank Rate
- b)Moral Suasion
- c)Margin Requirement
- d)All of the above
Correct answer is option 'A'. Can you explain this answer?
Which of these is a Quantitative Method of Credit control?
a)
Bank Rate
b)
Moral Suasion
c)
Margin Requirement
d)
All of the above
|
|
Ræjû Bhæï answered |
The important quantitative methods of credit control is (a) bank rate.The methods used by the central bank to regulate the flows of credit into particular directions of the economy are called qualitative or selective methods of credit control. Unlike the quantitative methods, which affect the total volume of credit, the qualitative methods affect the types of credit, extended by the commercial banks; they affect the composition rather than the size of credit in the economy.
The Reserve Bank of India issues all currency notes except:- a)500 Rupee note
- b)100 Rupee Note
- c)10 Rupee note
- d)1 Rupee note
Correct answer is option 'D'. Can you explain this answer?
The Reserve Bank of India issues all currency notes except:
a)
500 Rupee note
b)
100 Rupee Note
c)
10 Rupee note
d)
1 Rupee note
|
Vinit Gupta answered |
Because the power is in hands of government
Which of the following is a qualitative method of credit control - a)Bank rate
- b)Open market operations
- c)Variation in the reserve requirement
- d)Regulation of consumer credit
Correct answer is option 'D'. Can you explain this answer?
Which of the following is a qualitative method of credit control
a)
Bank rate
b)
Open market operations
c)
Variation in the reserve requirement
d)
Regulation of consumer credit
|
Amita Das answered |
Credit control is most important function of Reserve Bank of India. Credit control in the economy is required for the smooth functioning of the economy. By using credit control methods RBI tries to maintain monetary stability. There are two types of methods: Quantitative control to regulates the volume of total credit.
Which one of the following statement defines the term “Reverse Repo Rate?- a)The rate at which the commercial banks borrow money from RBI
- b)The rate at which RBI borrows from other banks
- c)The rate at which the commercial banks borrow from each other
- d)None of the above.
Correct answer is option 'A'. Can you explain this answer?
Which one of the following statement defines the term “Reverse Repo Rate?
a)
The rate at which the commercial banks borrow money from RBI
b)
The rate at which RBI borrows from other banks
c)
The rate at which the commercial banks borrow from each other
d)
None of the above.
|
Arka Kaur answered |
Reverse repo rate is the rate at which the central bank of a country (Reserve Bank of India in case of India) borrows money from commercial banks within the country. It is a monetary policy instrument which can be used to control the money supply in the country.
Who is the custodian of National reserves of international currency?- a)SBI
- b)IDBI
- c)RBI
- d)ICICI
Correct answer is option 'C'. Can you explain this answer?
Who is the custodian of National reserves of international currency?
a)
SBI
b)
IDBI
c)
RBI
d)
ICICI
|
|
Lipika Kumari answered |
The RBI acts as the custodian of the country's foreign exchange reserves, manages exchange control and acts as the agent of the government in respect of India's membership of the IMF
The portion of total deposit which a commercial bank has to keep with itself in liquid assets is known as - a)CRR
- b)SLR
- c)REPO
- d)Reverse REPO
Correct answer is option 'B'. Can you explain this answer?
The portion of total deposit which a commercial bank has to keep with itself in liquid assets is known as
a)
CRR
b)
SLR
c)
REPO
d)
Reverse REPO
|
Freedom Institute answered |
SLR means liquid statutory ratio. Every bank has to keep that amount of money every time. because customers can withdrew money any time. Bank can not give that money on loan or for any other purpose.
Which of the following is not a quantitative measure of credit control?- a)The Bank Rate Policy
- b)Open Market Operations
- c)Consumer Credit Regulation
- d)The Repo Rate.
Correct answer is option 'C'. Can you explain this answer?
Which of the following is not a quantitative measure of credit control?
a)
The Bank Rate Policy
b)
Open Market Operations
c)
Consumer Credit Regulation
d)
The Repo Rate.
|
Amrutha Goyal answered |
Quantitative Measures of Credit Control
Quantitative measures of credit control are the tools used by the central bank to regulate the supply of money in the economy. There are various quantitative measures of credit control, such as:
1. Bank Rate Policy - This is the interest rate at which the central bank lends money to commercial banks. By increasing or decreasing the bank rate, the central bank can control the amount of money in circulation in the economy.
2. Open Market Operations - This involves the buying and selling of government securities by the central bank. By buying government securities, the central bank injects money into the economy, while selling government securities withdraws money from the economy.
3. Repo Rate - This is the interest rate at which the central bank borrows money from commercial banks. By increasing or decreasing the repo rate, the central bank can influence the cost of borrowing for commercial banks and thereby regulate the supply of money in the economy.
4. Consumer Credit Regulation - This refers to the regulation of credit facilities provided by banks to consumers. The central bank can regulate the amount of credit that banks can provide to consumers by imposing limits on interest rates, loan amounts, and repayment periods.
Not a Quantitative Measure of Credit Control
Consumer Credit Regulation is not a quantitative measure of credit control because it does not directly regulate the supply of money in the economy. Instead, it regulates the credit facilities provided by banks to consumers. While it can indirectly affect the supply of money in the economy by influencing the amount of credit provided by banks, it is not a direct tool used by the central bank to regulate the supply of money. Therefore, option 'C' is the correct answer.
Quantitative measures of credit control are the tools used by the central bank to regulate the supply of money in the economy. There are various quantitative measures of credit control, such as:
1. Bank Rate Policy - This is the interest rate at which the central bank lends money to commercial banks. By increasing or decreasing the bank rate, the central bank can control the amount of money in circulation in the economy.
2. Open Market Operations - This involves the buying and selling of government securities by the central bank. By buying government securities, the central bank injects money into the economy, while selling government securities withdraws money from the economy.
3. Repo Rate - This is the interest rate at which the central bank borrows money from commercial banks. By increasing or decreasing the repo rate, the central bank can influence the cost of borrowing for commercial banks and thereby regulate the supply of money in the economy.
4. Consumer Credit Regulation - This refers to the regulation of credit facilities provided by banks to consumers. The central bank can regulate the amount of credit that banks can provide to consumers by imposing limits on interest rates, loan amounts, and repayment periods.
Not a Quantitative Measure of Credit Control
Consumer Credit Regulation is not a quantitative measure of credit control because it does not directly regulate the supply of money in the economy. Instead, it regulates the credit facilities provided by banks to consumers. While it can indirectly affect the supply of money in the economy by influencing the amount of credit provided by banks, it is not a direct tool used by the central bank to regulate the supply of money. Therefore, option 'C' is the correct answer.
Bank Rate is also known as _______.- a)Discount Rate
- b)REPO Rate
- c)Reserve Repo Rate
- d)Lending Rate
Correct answer is option 'A'. Can you explain this answer?
Bank Rate is also known as _______.
a)
Discount Rate
b)
REPO Rate
c)
Reserve Repo Rate
d)
Lending Rate
|
|
Alok Mehta answered |
Bank rate, also referred to as the discount rate in American English, is the rate of interest which a central bank charges on its loans and advances to a commercial bank. ... Whenever a bank has a shortage of funds, they can typically borrow from the central bank based on the monetary policy of the country.
The Reserve Bank of India was nationalized in the year:- a)1935
- b)1949
- c)1969
- d)1991
Correct answer is option 'B'. Can you explain this answer?
The Reserve Bank of India was nationalized in the year:
a)
1935
b)
1949
c)
1969
d)
1991
|
|
Freedom Institute answered |
B: 1949
The Reserve Bank of India (RBI) was nationalized in the year 1949. Prior to nationalization, the RBI was a privately-owned institution that was established in 1935.
The nationalization of the RBI was carried out through the Reserve Bank of India (Transfer to Public Ownership) Act, 1948, which came into effect on 1 January 1949. Under the act, the RBI became a state-owned institution and the government of India acquired a controlling stake in the bank.
After nationalization, the RBI continued to perform its functions as the central bank of the country, including issuing and distributing currency notes, regulating and supervising the banking system, and managing the country's monetary policy.
The RBI was not nationalized in 1935, 1969, or 1991. These are all incorrect dates.
The rate at which the RBI rediscounts the Bills of Commercial banks is known as. - a)Repo rate
- b)Bank rate
- c)SLR
- d)CRR
Correct answer is option 'B'. Can you explain this answer?
The rate at which the RBI rediscounts the Bills of Commercial banks is known as.
a)
Repo rate
b)
Bank rate
c)
SLR
d)
CRR
|
|
Priya Patel answered |
Bank Rate refers to the official interest rate at which RBI will provide loans to the banking system which includes commercial / cooperative banks, development banks etc. Such loans are given out either by direct lending or by rediscounting (buying back) the bills of commercial banks and treasury bills. Thus, bank rate is also known as discount rate. Bank rate is used as a signal by the RBI to the commercial banks on RBI’s thinking of what the interest rates should be.
Impact of Bank Rate
When RBI increases the bank rate, the cost of borrowing for banks rises and this credit volume gets reduced leading to decline in supply of money. Thus, increase in Bank rate reflects tightening of RBI monetary policy.
Central Bank of a country does not deal with ________.- a)State Government
- b)Public
- c)Central Government
- d)Commercial Banks
Correct answer is option 'B'. Can you explain this answer?
Central Bank of a country does not deal with ________.
a)
State Government
b)
Public
c)
Central Government
d)
Commercial Banks
|
Saumya Desai answered |
Central Bank of a country does not deal with State Government.
Explanation:
Central Bank is the apex financial institution of a country that controls and regulates the money supply in the economy. It performs various functions for maintaining the stability and growth of the economy. However, it does not deal with the State Government directly, as the state government has its own financial institution known as State Bank of India (SBI).
The Central Bank of a country deals with the following entities:
Public:
Central Bank of a country deals with the public directly by providing various financial services like opening bank accounts, providing loans, issuing currency notes, etc.
Central Government:
Central Bank is also responsible for dealing with the Central Government of the country. It performs various functions like managing the government's accounts, issuing and managing government securities like bonds and treasury bills, etc.
Commercial Banks:
Central Bank is responsible for regulating and supervising commercial banks in the country. It provides loans and advances to commercial banks and also acts as a lender of the last resort.
Conclusion:
Although the Central Bank of a country does not deal with the State Government directly, it indirectly affects the state government by regulating and controlling the money supply in the economy.
Explanation:
Central Bank is the apex financial institution of a country that controls and regulates the money supply in the economy. It performs various functions for maintaining the stability and growth of the economy. However, it does not deal with the State Government directly, as the state government has its own financial institution known as State Bank of India (SBI).
The Central Bank of a country deals with the following entities:
Public:
Central Bank of a country deals with the public directly by providing various financial services like opening bank accounts, providing loans, issuing currency notes, etc.
Central Government:
Central Bank is also responsible for dealing with the Central Government of the country. It performs various functions like managing the government's accounts, issuing and managing government securities like bonds and treasury bills, etc.
Commercial Banks:
Central Bank is responsible for regulating and supervising commercial banks in the country. It provides loans and advances to commercial banks and also acts as a lender of the last resort.
Conclusion:
Although the Central Bank of a country does not deal with the State Government directly, it indirectly affects the state government by regulating and controlling the money supply in the economy.
Which one of the following measures is not adopted by RBI for controlling credit in India?- a)Cash Deposit ratio
- b)Cash Reserve ratio
- c)Statutory Liquidity ratio
- d)Selective credit control
Correct answer is 'A'. Can you explain this answer?
Which one of the following measures is not adopted by RBI for controlling credit in India?
a)
Cash Deposit ratio
b)
Cash Reserve ratio
c)
Statutory Liquidity ratio
d)
Selective credit control
|
|
Hrishikesh Mukherjee answered |
Introduction:
The Reserve Bank of India (RBI) is the central bank of India, responsible for controlling and regulating the monetary policy of the country. One of the key roles of the RBI is to control credit in order to maintain stability in the financial system. To achieve this, the RBI adopts various measures, including cash deposit ratio, cash reserve ratio, statutory liquidity ratio, and selective credit control.
Cash Deposit Ratio:
The cash deposit ratio refers to the ratio of cash deposits that commercial banks are required to maintain with the RBI as a percentage of their net demand and time liabilities. This measure helps in controlling credit by reducing the availability of funds with commercial banks for lending purposes. When the cash deposit ratio is increased, banks have to keep a larger portion of their deposits with the RBI, reducing the amount of money available for lending.
Cash Reserve Ratio:
The cash reserve ratio is the percentage of net demand and time liabilities that commercial banks are required to maintain as cash reserves with the RBI. This measure also helps in controlling credit by reducing the lendable resources of the banks. When the cash reserve ratio is increased, banks have to maintain a larger portion of their deposits as cash reserves, limiting their ability to lend.
Statutory Liquidity Ratio:
The statutory liquidity ratio refers to the percentage of net demand and time liabilities that banks are required to maintain in the form of liquid assets, such as cash, gold, and government securities. This measure also helps in controlling credit by restricting the lendable resources of the banks. When the statutory liquidity ratio is increased, banks have to maintain a higher proportion of their liabilities in the form of liquid assets, reducing the amount available for lending.
Selective Credit Control:
Selective credit control refers to the measures adopted by the RBI to regulate the flow of credit to specific sectors or activities. This includes prescribing the maximum loan-to-value ratio for certain types of loans, setting limits on sectoral lending, and imposing restrictions on the purchase of certain types of assets. Selective credit control helps in directing credit towards priority sectors and preventing excessive lending to sectors that may pose risks to the financial system.
Conclusion:
Among the measures mentioned, the cash deposit ratio is not adopted by the RBI for controlling credit in India. The RBI primarily uses the cash reserve ratio, statutory liquidity ratio, and selective credit control to regulate credit and maintain financial stability in the country.
The Reserve Bank of India (RBI) is the central bank of India, responsible for controlling and regulating the monetary policy of the country. One of the key roles of the RBI is to control credit in order to maintain stability in the financial system. To achieve this, the RBI adopts various measures, including cash deposit ratio, cash reserve ratio, statutory liquidity ratio, and selective credit control.
Cash Deposit Ratio:
The cash deposit ratio refers to the ratio of cash deposits that commercial banks are required to maintain with the RBI as a percentage of their net demand and time liabilities. This measure helps in controlling credit by reducing the availability of funds with commercial banks for lending purposes. When the cash deposit ratio is increased, banks have to keep a larger portion of their deposits with the RBI, reducing the amount of money available for lending.
Cash Reserve Ratio:
The cash reserve ratio is the percentage of net demand and time liabilities that commercial banks are required to maintain as cash reserves with the RBI. This measure also helps in controlling credit by reducing the lendable resources of the banks. When the cash reserve ratio is increased, banks have to maintain a larger portion of their deposits as cash reserves, limiting their ability to lend.
Statutory Liquidity Ratio:
The statutory liquidity ratio refers to the percentage of net demand and time liabilities that banks are required to maintain in the form of liquid assets, such as cash, gold, and government securities. This measure also helps in controlling credit by restricting the lendable resources of the banks. When the statutory liquidity ratio is increased, banks have to maintain a higher proportion of their liabilities in the form of liquid assets, reducing the amount available for lending.
Selective Credit Control:
Selective credit control refers to the measures adopted by the RBI to regulate the flow of credit to specific sectors or activities. This includes prescribing the maximum loan-to-value ratio for certain types of loans, setting limits on sectoral lending, and imposing restrictions on the purchase of certain types of assets. Selective credit control helps in directing credit towards priority sectors and preventing excessive lending to sectors that may pose risks to the financial system.
Conclusion:
Among the measures mentioned, the cash deposit ratio is not adopted by the RBI for controlling credit in India. The RBI primarily uses the cash reserve ratio, statutory liquidity ratio, and selective credit control to regulate credit and maintain financial stability in the country.
An increase in money supply ______ in a nation’s Economy will decrease the following.- a)Open market purchase by the nation’s Central Bank
- b)A deserve in the bank rate
- c)A decrease in the reserve ratio
- d)A decrease in the margin requirement.
Correct answer is option 'A'. Can you explain this answer?
An increase in money supply ______ in a nation’s Economy will decrease the following.
a)
Open market purchase by the nation’s Central Bank
b)
A deserve in the bank rate
c)
A decrease in the reserve ratio
d)
A decrease in the margin requirement.
|
|
Nikita Singh answered |
During open market situations the central bank sells the the securities which enables transfer of money from households to the central bank which reduces money supply in the economy and stabilizes the inflation
Which of the following is not qualitative credit control measure of the RBI?- a)Capital Rationing
- b)Moral Suasion
- c)SLR
- d)Margin requirement
Correct answer is option 'C'. Can you explain this answer?
Which of the following is not qualitative credit control measure of the RBI?
a)
Capital Rationing
b)
Moral Suasion
c)
SLR
d)
Margin requirement
|
|
Lakshmi Kaur answered |
The correct answer is option 'C' - SLR (Statutory Liquidity Ratio).
Explanation:
The Reserve Bank of India (RBI) uses various quantitative and qualitative measures to control credit in the economy. These measures are implemented to regulate the flow of credit and manage inflation.
Qualitative credit control measures are non-quantifiable measures that are aimed at influencing the credit behavior of banks and financial institutions. These measures are more flexible and discretionary compared to quantitative measures. They include:
a) Capital Rationing:
Capital rationing is a qualitative credit control measure where the RBI restricts or limits the amount of capital that banks can allocate for lending purposes. By imposing capital limits, the RBI ensures that banks have sufficient capital to meet regulatory requirements and maintain their financial stability. This measure helps in controlling excessive lending and prevents the banks from taking excessive risks.
b) Moral Suasion:
Moral suasion is a persuasive technique used by the RBI to influence the lending behavior of banks. It involves informal communication, discussions, meetings, and directives to convince banks to adopt certain credit policies. The RBI uses moral suasion to encourage banks to increase or decrease their lending activities in line with the monetary policy objectives.
c) SLR (Statutory Liquidity Ratio):
SLR is a quantitative credit control measure and not a qualitative measure. It refers to the percentage of a bank's net demand and time liabilities (NDTL) that it is required to maintain in the form of liquid assets such as cash, gold, government securities, etc. The purpose of SLR is to ensure the solvency and liquidity of banks. By adjusting the SLR, the RBI can control the flow of credit in the economy. An increase in the SLR reduces the funds available for lending, while a decrease in the SLR expands the lending capacity of banks.
d) Margin Requirement:
Margin requirement is a qualitative credit control measure that pertains to the lending against specific securities. The RBI can impose higher margin requirements, i.e., increasing the proportion of collateral that borrowers need to provide, to restrict the availability of credit for certain types of loans. Higher margin requirements reduce the amount of loans that can be availed against a given collateral, thus limiting credit expansion.
In conclusion, the correct answer is option 'C' - SLR, as it is a quantitative credit control measure rather than a qualitative measure.
Explanation:
The Reserve Bank of India (RBI) uses various quantitative and qualitative measures to control credit in the economy. These measures are implemented to regulate the flow of credit and manage inflation.
Qualitative credit control measures are non-quantifiable measures that are aimed at influencing the credit behavior of banks and financial institutions. These measures are more flexible and discretionary compared to quantitative measures. They include:
a) Capital Rationing:
Capital rationing is a qualitative credit control measure where the RBI restricts or limits the amount of capital that banks can allocate for lending purposes. By imposing capital limits, the RBI ensures that banks have sufficient capital to meet regulatory requirements and maintain their financial stability. This measure helps in controlling excessive lending and prevents the banks from taking excessive risks.
b) Moral Suasion:
Moral suasion is a persuasive technique used by the RBI to influence the lending behavior of banks. It involves informal communication, discussions, meetings, and directives to convince banks to adopt certain credit policies. The RBI uses moral suasion to encourage banks to increase or decrease their lending activities in line with the monetary policy objectives.
c) SLR (Statutory Liquidity Ratio):
SLR is a quantitative credit control measure and not a qualitative measure. It refers to the percentage of a bank's net demand and time liabilities (NDTL) that it is required to maintain in the form of liquid assets such as cash, gold, government securities, etc. The purpose of SLR is to ensure the solvency and liquidity of banks. By adjusting the SLR, the RBI can control the flow of credit in the economy. An increase in the SLR reduces the funds available for lending, while a decrease in the SLR expands the lending capacity of banks.
d) Margin Requirement:
Margin requirement is a qualitative credit control measure that pertains to the lending against specific securities. The RBI can impose higher margin requirements, i.e., increasing the proportion of collateral that borrowers need to provide, to restrict the availability of credit for certain types of loans. Higher margin requirements reduce the amount of loans that can be availed against a given collateral, thus limiting credit expansion.
In conclusion, the correct answer is option 'C' - SLR, as it is a quantitative credit control measure rather than a qualitative measure.
The RBI can decrease the bank credit by:
- a)Maintaining the bank rate at the same level
- b)Increasing the Bank rate, Lowering the Bank rate and Lowering the CRR
- c)Increasing the CRR
- d)None of these
Correct answer is option 'B'. Can you explain this answer?
The RBI can decrease the bank credit by:
a)
Maintaining the bank rate at the same level
b)
Increasing the Bank rate, Lowering the Bank rate and Lowering the CRR
c)
Increasing the CRR
d)
None of these
|
|
Pranav Gupta answered |
Decreasing Bank Credit through RBI Policy Measures
The Reserve Bank of India (RBI) can influence the level of bank credit in the economy through various policy measures. One of the primary objectives of RBI is to maintain price stability and promote economic growth.
One of the ways RBI can decrease the bank credit is by reducing the flow of funds to the banks. This can be achieved through the following measures:
1. Increasing Bank Rate: RBI can increase the bank rate, which is the rate at which the central bank lends money to the commercial banks. When the bank rate is increased, the cost of borrowing for the banks increases, which leads to a decrease in the credit available for the customers.
2. Lowering Bank Rate: On the other hand, RBI can also decrease the bank rate. This would encourage the banks to borrow more from the central bank at a lower rate and lend more to the customers, thus increasing the credit available in the economy.
3. Lowering Cash Reserve Ratio: RBI can also lower the cash reserve ratio (CRR), which is the percentage of deposits that banks are required to maintain with the central bank. When the CRR is lowered, banks have more funds available to lend, which leads to an increase in the credit available in the economy.
Conclusion
Thus, it can be concluded that RBI can decrease the bank credit by increasing the bank rate or lowering the CRR, or even by lowering the bank rate. Option 'B' is the correct answer.
The Reserve Bank of India (RBI) can influence the level of bank credit in the economy through various policy measures. One of the primary objectives of RBI is to maintain price stability and promote economic growth.
One of the ways RBI can decrease the bank credit is by reducing the flow of funds to the banks. This can be achieved through the following measures:
1. Increasing Bank Rate: RBI can increase the bank rate, which is the rate at which the central bank lends money to the commercial banks. When the bank rate is increased, the cost of borrowing for the banks increases, which leads to a decrease in the credit available for the customers.
2. Lowering Bank Rate: On the other hand, RBI can also decrease the bank rate. This would encourage the banks to borrow more from the central bank at a lower rate and lend more to the customers, thus increasing the credit available in the economy.
3. Lowering Cash Reserve Ratio: RBI can also lower the cash reserve ratio (CRR), which is the percentage of deposits that banks are required to maintain with the central bank. When the CRR is lowered, banks have more funds available to lend, which leads to an increase in the credit available in the economy.
Conclusion
Thus, it can be concluded that RBI can decrease the bank credit by increasing the bank rate or lowering the CRR, or even by lowering the bank rate. Option 'B' is the correct answer.
Which of the following of credit control?- a)Credit Rationing
- b)Change in Cash Reserves of Commercial Banks
- c)Publicity and Notifications
- d)Regulation of Consumer Credit.
Correct answer is option 'B'. Can you explain this answer?
Which of the following of credit control?
a)
Credit Rationing
b)
Change in Cash Reserves of Commercial Banks
c)
Publicity and Notifications
d)
Regulation of Consumer Credit.
|
|
Freedom Institute answered |
The different instruments of credit control used by the Reserve Bank of India are Statutory Liquidity Ratio (SLR), Cash Reserve Ratio (CRR), the Bank Rate Policy, Selective Credit Control (SCC), Open Market Operations (OMOs).
Who works as RBI's agent at places where it has no office of its own?- a)State Bank of India
- b)Ministry of Finance
- c)Government of India
- d)International Monetary Fund
Correct answer is option 'A'. Can you explain this answer?
Who works as RBI's agent at places where it has no office of its own?
a)
State Bank of India
b)
Ministry of Finance
c)
Government of India
d)
International Monetary Fund
|
|
Niharika Joshi answered |
State Bank of India as RBI's Agent
The Reserve Bank of India (RBI) is the central bank of India and manages the country's monetary policy, regulates the banking sector, issues currency and operates payment systems. RBI has its own offices in various parts of the country to carry out its functions. However, there are some places where RBI does not have its own office. In such places, RBI appoints an agent to carry out its functions. The agent is appointed by RBI to perform certain functions on its behalf.
State Bank of India (SBI) is the agent of RBI in places where it does not have its own office. SBI is the largest commercial bank in India and has a vast network of branches across the country. As an agent of RBI, SBI performs various functions on behalf of RBI. Some of the functions performed by SBI as an agent of RBI are:
1. Currency Management: SBI manages the currency chest on behalf of RBI. It ensures that the currency issued by RBI is distributed to various banks and financial institutions in the region.
2. Government Business: SBI carries out various government transactions on behalf of RBI. It collects taxes, issues government bonds, and manages the public debt.
3. Banking Regulation: SBI acts as an agent of RBI in regulating banks and financial institutions in the region. It ensures that the banks comply with the regulations laid down by RBI.
4. Payment and Settlement Systems: SBI operates the payment and settlement systems on behalf of RBI. It ensures that the payment and settlement systems are safe, secure, and efficient.
In conclusion, State Bank of India works as an agent of RBI in places where RBI does not have its own office. As an agent of RBI, SBI performs various functions on behalf of RBI to ensure the smooth functioning of the monetary system in the country.
The Reserve Bank of India (RBI) is the central bank of India and manages the country's monetary policy, regulates the banking sector, issues currency and operates payment systems. RBI has its own offices in various parts of the country to carry out its functions. However, there are some places where RBI does not have its own office. In such places, RBI appoints an agent to carry out its functions. The agent is appointed by RBI to perform certain functions on its behalf.
State Bank of India (SBI) is the agent of RBI in places where it does not have its own office. SBI is the largest commercial bank in India and has a vast network of branches across the country. As an agent of RBI, SBI performs various functions on behalf of RBI. Some of the functions performed by SBI as an agent of RBI are:
1. Currency Management: SBI manages the currency chest on behalf of RBI. It ensures that the currency issued by RBI is distributed to various banks and financial institutions in the region.
2. Government Business: SBI carries out various government transactions on behalf of RBI. It collects taxes, issues government bonds, and manages the public debt.
3. Banking Regulation: SBI acts as an agent of RBI in regulating banks and financial institutions in the region. It ensures that the banks comply with the regulations laid down by RBI.
4. Payment and Settlement Systems: SBI operates the payment and settlement systems on behalf of RBI. It ensures that the payment and settlement systems are safe, secure, and efficient.
In conclusion, State Bank of India works as an agent of RBI in places where RBI does not have its own office. As an agent of RBI, SBI performs various functions on behalf of RBI to ensure the smooth functioning of the monetary system in the country.
Who is the custodian of national reserves of international currency?- a)SBI
- b)RBI
- c)ICICI
- d)World Bank
Correct answer is option 'B'. Can you explain this answer?
Who is the custodian of national reserves of international currency?
a)
SBI
b)
RBI
c)
ICICI
d)
World Bank
|
|
Amrutha Goyal answered |
Custodian of National Reserves of International Currency
The Reserve Bank of India (RBI) is the custodian of national reserves of international currency. The RBI is the central bank of India, responsible for regulating the country's monetary and financial system. It plays a crucial role in maintaining the country's foreign exchange reserves, which are essential for international trade and economic stability.
Functions of RBI as custodian of national reserves of international currency:
1. Maintaining Foreign Exchange Reserves: The RBI holds and manages India's foreign exchange reserves, which consist of various foreign currencies, gold, and Special Drawing Rights (SDRs) allocated by the International Monetary Fund (IMF). These reserves are used to finance the country's imports and debt obligations, and to maintain the stability of the rupee in the foreign exchange market.
2. Managing Exchange Rate: The RBI manages the exchange rate of the Indian rupee against other major currencies. It intervenes in the foreign exchange market to buy or sell foreign currencies to maintain the desired exchange rate level.
3. Regulating Foreign Exchange Transactions: The RBI regulates all foreign exchange transactions in India, including imports, exports, and remittances. It also sets the guidelines for foreign investment in the country.
4. Representing India in International Financial Institutions: The RBI represents India in various international financial institutions, such as the IMF, World Bank, and Asian Development Bank. It participates in the decision-making process of these institutions and helps to shape global economic policies.
Conclusion
In summary, the RBI plays a crucial role as the custodian of national reserves of international currency. It manages India's foreign exchange reserves, regulates foreign exchange transactions, maintains exchange rate stability, and represents India in international financial institutions. These functions are essential for maintaining the country's economic stability and promoting international trade and investment.
The Reserve Bank of India (RBI) is the custodian of national reserves of international currency. The RBI is the central bank of India, responsible for regulating the country's monetary and financial system. It plays a crucial role in maintaining the country's foreign exchange reserves, which are essential for international trade and economic stability.
Functions of RBI as custodian of national reserves of international currency:
1. Maintaining Foreign Exchange Reserves: The RBI holds and manages India's foreign exchange reserves, which consist of various foreign currencies, gold, and Special Drawing Rights (SDRs) allocated by the International Monetary Fund (IMF). These reserves are used to finance the country's imports and debt obligations, and to maintain the stability of the rupee in the foreign exchange market.
2. Managing Exchange Rate: The RBI manages the exchange rate of the Indian rupee against other major currencies. It intervenes in the foreign exchange market to buy or sell foreign currencies to maintain the desired exchange rate level.
3. Regulating Foreign Exchange Transactions: The RBI regulates all foreign exchange transactions in India, including imports, exports, and remittances. It also sets the guidelines for foreign investment in the country.
4. Representing India in International Financial Institutions: The RBI represents India in various international financial institutions, such as the IMF, World Bank, and Asian Development Bank. It participates in the decision-making process of these institutions and helps to shape global economic policies.
Conclusion
In summary, the RBI plays a crucial role as the custodian of national reserves of international currency. It manages India's foreign exchange reserves, regulates foreign exchange transactions, maintains exchange rate stability, and represents India in international financial institutions. These functions are essential for maintaining the country's economic stability and promoting international trade and investment.
The CRR is determined in India by:- a)Ministry of finance
- b)State Bank of India
- c)Reserve Bank of India
- d)Parliament
Correct answer is option 'C'. Can you explain this answer?
The CRR is determined in India by:
a)
Ministry of finance
b)
State Bank of India
c)
Reserve Bank of India
d)
Parliament
|
BT Educators answered |
C: Reserve Bank of India
The cash reserve ratio (CRR) is determined by the Reserve Bank of India (RBI), which is the central bank of India. The CRR is the percentage of deposits that commercial banks are required to hold with the RBI as a reserve.
The RBI uses the CRR as a tool to regulate the supply of credit in the economy. By increasing the CRR, the RBI can reduce the amount of money that commercial banks have available to lend, which can reduce the supply of credit in the economy. By decreasing the CRR, the RBI can increase the amount of money that commercial banks have available to lend, which can increase the supply of credit in the economy.
The Ministry of Finance, State Bank of India (SBI), and Parliament are not responsible for determining the CRR in India. Only the RBI has this authority as the central bank of the country.
Ten rupee note has been issued by ______:- a)RBI
- b)Government
- c)Commercial banks
- d)Any one of above
Correct answer is option 'A'. Can you explain this answer?
Ten rupee note has been issued by ______:
a)
RBI
b)
Government
c)
Commercial banks
d)
Any one of above
|
Rohini Desai answered |
A: RBI
The 10 rupee note has been issued by the Reserve Bank of India (RBI), which is the central bank of India. The RBI is responsible for issuing and distributing currency notes in India, including the 10 rupee note.
The RBI is an autonomous institution that is responsible for managing the country's monetary policy, including the issuance and circulation of currency notes. It is also responsible for regulating and supervising the country's banking system and for maintaining the stability of the financial system.
The government of India and commercial banks do not issue currency notes in India. The government, through the Ministry of Finance, is responsible for issuing the 1 rupee note, which is the only currency note in India that is not issued by the RBI. Commercial banks are not authorized to issue currency notes and can only lend money to their customers.
Lender of the last resort means :- a)The Government coming to the rescue of sick industries.
- b)Central Bank coming to the rescue of banks in times of financial crisis.
- c)Both
- d)None
Correct answer is option 'B'. Can you explain this answer?
Lender of the last resort means :
a)
The Government coming to the rescue of sick industries.
b)
Central Bank coming to the rescue of banks in times of financial crisis.
c)
Both
d)
None
|
Kavita Joshi answered |
A lender of last resort is an institution, usually a country's central bank, that offers loans to banks or other eligible institutions that are experiencing financial difficulty or are considered highly risky or near collapse. In the United States, the Federal Reserve acts as the lender of last resort to institutions that do not have any other means of borrowing and whose failure to obtain credit would dramatically affect the economy.
The Quantitative measure of credit regulation by RBI is : - a)Bank Rate Policy
- b)Open market operations
- c)Variable Reserve Ratio
- d)All of the above
Correct answer is option 'D'. Can you explain this answer?
The Quantitative measure of credit regulation by RBI is :
a)
Bank Rate Policy
b)
Open market operations
c)
Variable Reserve Ratio
d)
All of the above
|
|
Kavita Joshi answered |
The quantitative measures of credit control are :
1. Bank Rate Policy: The bank rate is the Official interest rate at which RBI rediscounts the approved bills held by commercial banks. For controlling the credit, inflation and money supply, RBI will increase the Bank Rate. Current Bank Rate is 6%.
2. Open Market Operations: OMO The Open market Operations refer to direct sales and purchase of securities and bills in the open market by Reserve bank of India. The aim is to control volume of credit.
3. Cash Reserve Ratio: Cash reserve ratio refers to that portion of total deposits in commercial Bank which it has to keep with RBI as cash reserves. The current Cash reserve Ratio is 6%.
4. Statutory Liquidity Ratio: It refers to that portion of deposits with the banks which it has to keep with itself as liquid assets(Gold, approved govt. securities etc.) . the current SLR is 25%.
If RBI wishes to control credit and discourage credit it would increase CRR & SLR.
Which of the following is not qualitative credit control measure of the RBI?- a)Capital Rationing
- b)Moral Suasion
- c)SLR
- d)Margin requirement
Correct answer is option 'C'. Can you explain this answer?
Which of the following is not qualitative credit control measure of the RBI?
a)
Capital Rationing
b)
Moral Suasion
c)
SLR
d)
Margin requirement
|
Srsps answered |
C) SLR are not reserved with the Reserve Bank of India (RBI), but with banks themselves.
The SLR is fixed by the RBI. CRR (Cash Reserve Ratio) and SLR have been the traditional tools of the central bank's monetary policy to control credit growth, flow of liquidity and inflation in the economy.
Which of the following is a tool of monetary policy that a nation’s Central Bank could use to stabilize the economy during an inflationary period?- a)Selling Government Securities
- b)Lowering banks reserve requirements
- c)Lowering bank discount rate
- d)None of the above.
Correct answer is option 'A'. Can you explain this answer?
Which of the following is a tool of monetary policy that a nation’s Central Bank could use to stabilize the economy during an inflationary period?
a)
Selling Government Securities
b)
Lowering banks reserve requirements
c)
Lowering bank discount rate
d)
None of the above.
|
|
Niharika Datta answered |
Central banks use contractionary monetary policy to reduce inflation. They reduce the money supply by restricting the amo of money banks can lend. The banks charge a higher interest rate, making loans more expensive. Fewer businesses and individuals borrow, slowing growth.
The ‘lender of last resort’ means. - a)The Government coming to the rescue of sick industries
- b)Commercial Banks coming to the rescue of the Cooperative banks
- c)Central Bank coming to the rescue of banks in times of financial crisis
- d)None of the above
Correct answer is option 'C'. Can you explain this answer?
The ‘lender of last resort’ means.
a)
The Government coming to the rescue of sick industries
b)
Commercial Banks coming to the rescue of the Cooperative banks
c)
Central Bank coming to the rescue of banks in times of financial crisis
d)
None of the above
|
|
Sahil Malik answered |
The what? Could you please provide more context or information about what you are referring to?
What is Bank rate?- a)The rate of interest at which commercial banks give loan to their customers
- b)The rate of interest at which Banks invite long term deposits of the public
- c)The rate at which the Central Bank of a country discounts the bills of commercial banks
- d)The rate at which Central Bank of a country sells its securities to the public.
Correct answer is option 'C'. Can you explain this answer?
What is Bank rate?
a)
The rate of interest at which commercial banks give loan to their customers
b)
The rate of interest at which Banks invite long term deposits of the public
c)
The rate at which the Central Bank of a country discounts the bills of commercial banks
d)
The rate at which Central Bank of a country sells its securities to the public.
|
|
Maheshwar Sharma answered |
**Bank Rate**
The bank rate is the rate at which the central bank of a country discounts the bills of commercial banks. It is an important tool used by the central bank to control the money supply and interest rates in the economy. The bank rate is also known as the discount rate or the rediscount rate.
**Explanation:**
The bank rate is the rate at which the central bank lends money to commercial banks against the collateral of government securities or bills of exchange. When commercial banks have a shortage of funds, they can borrow from the central bank at the bank rate. This helps in meeting their liquidity requirements and ensures the smooth functioning of the banking system.
The central bank uses the bank rate as a monetary policy tool to influence the money supply and interest rates in the economy. By changing the bank rate, the central bank can affect the cost of borrowing for commercial banks, which in turn affects the interest rates offered to customers.
When the central bank increases the bank rate:
1. **Impact on commercial banks:** Commercial banks will have to pay a higher interest rate when borrowing from the central bank. This increases their cost of funds and makes borrowing more expensive for them.
2. **Impact on customers:** Commercial banks will also increase their lending rates to customers to maintain their profitability. This leads to higher interest rates for loans and other credit facilities for customers.
3. **Impact on money supply:** Higher interest rates discourage borrowing and lending, which reduces the money supply in the economy. This helps in controlling inflation and stabilizing the economy.
When the central bank decreases the bank rate:
1. **Impact on commercial banks:** Commercial banks will have access to cheaper funds from the central bank. This lowers their cost of funds and makes borrowing more affordable for them.
2. **Impact on customers:** Commercial banks may lower their lending rates to customers, making loans and other credit facilities more affordable.
3. **Impact on money supply:** Lower interest rates encourage borrowing and lending, which increases the money supply in the economy. This stimulates economic growth and investment.
By adjusting the bank rate, the central bank can influence the cost of funds, interest rates, and money supply to achieve its monetary policy objectives such as price stability, economic growth, and financial stability. The bank rate is an important tool in the central bank's toolkit for managing the economy.
The bank rate is the rate at which the central bank of a country discounts the bills of commercial banks. It is an important tool used by the central bank to control the money supply and interest rates in the economy. The bank rate is also known as the discount rate or the rediscount rate.
**Explanation:**
The bank rate is the rate at which the central bank lends money to commercial banks against the collateral of government securities or bills of exchange. When commercial banks have a shortage of funds, they can borrow from the central bank at the bank rate. This helps in meeting their liquidity requirements and ensures the smooth functioning of the banking system.
The central bank uses the bank rate as a monetary policy tool to influence the money supply and interest rates in the economy. By changing the bank rate, the central bank can affect the cost of borrowing for commercial banks, which in turn affects the interest rates offered to customers.
When the central bank increases the bank rate:
1. **Impact on commercial banks:** Commercial banks will have to pay a higher interest rate when borrowing from the central bank. This increases their cost of funds and makes borrowing more expensive for them.
2. **Impact on customers:** Commercial banks will also increase their lending rates to customers to maintain their profitability. This leads to higher interest rates for loans and other credit facilities for customers.
3. **Impact on money supply:** Higher interest rates discourage borrowing and lending, which reduces the money supply in the economy. This helps in controlling inflation and stabilizing the economy.
When the central bank decreases the bank rate:
1. **Impact on commercial banks:** Commercial banks will have access to cheaper funds from the central bank. This lowers their cost of funds and makes borrowing more affordable for them.
2. **Impact on customers:** Commercial banks may lower their lending rates to customers, making loans and other credit facilities more affordable.
3. **Impact on money supply:** Lower interest rates encourage borrowing and lending, which increases the money supply in the economy. This stimulates economic growth and investment.
By adjusting the bank rate, the central bank can influence the cost of funds, interest rates, and money supply to achieve its monetary policy objectives such as price stability, economic growth, and financial stability. The bank rate is an important tool in the central bank's toolkit for managing the economy.
When the bank rate increases the demand for loans _______:- a)Reduces
- b)Increases marginally
- c)Remains unchanged
- d)Increases drastically
Correct answer is option 'A'. Can you explain this answer?
When the bank rate increases the demand for loans _______:
a)
Reduces
b)
Increases marginally
c)
Remains unchanged
d)
Increases drastically
|
|
Freedom Institute answered |
A: Reduces
When the bank rate increases, the demand for loans tends to reduce. The bank rate is the interest rate at which the central bank of a country lends money to commercial banks. When the bank rate is increased, it becomes more expensive for banks to borrow from the central bank, which in turn increases the cost of borrowing for customers. As a result, the demand for loans tends to decrease as customers are less willing to borrow at higher interest rates.
This is because higher interest rates increase the cost of borrowing for businesses and households, which can reduce their ability and willingness to take out loans. Higher interest rates may also reduce the demand for loans by reducing the demand for investment and consumption, as higher borrowing costs can make such activities less attractive.
However, the impact of a change in the bank rate on the demand for loans may not be the same in all cases and may depend on a variety of factors such as the overall economic conditions, the availability of alternative sources of financing, and the creditworthiness of the borrowers.
Monetary policy includes:- a)Regulation of money
- b)Provides employment
- c)Credit control
- d)All of these.
Correct answer is option 'C'. Can you explain this answer?
Monetary policy includes:
a)
Regulation of money
b)
Provides employment
c)
Credit control
d)
All of these.
|
|
Rajat Patel answered |
The Monetary Policy regulates the supply of money and the cost and availability of credit in the economy. It deals with both the lending and borrowing rates of interest for commercial banks. The Monetary Policy aims to maintain price stability, full employment and economic growth.
Which of the following is not a selective credit control method :- a)Rationing of credit
- b)Direct Action
- c)Change in margin requirements
- d)Reserve Requirement changes
Correct answer is option 'D'. Can you explain this answer?
Which of the following is not a selective credit control method :
a)
Rationing of credit
b)
Direct Action
c)
Change in margin requirements
d)
Reserve Requirement changes
|
|
Kavita Joshi answered |
The reserve requirement (or cash reserve ratio) is a central bank regulation employed by most, but not all, of the world's central banks, that sets the minimum amount of reserves that must be held by a commercial bank.
RBI was Nationalized in :- a)1959
- b)1947
- c)1945
- d)1949
Correct answer is option 'D'. Can you explain this answer?
RBI was Nationalized in :
a)
1959
b)
1947
c)
1945
d)
1949
|
Sameer Jain answered |
Introduction:
The Reserve Bank of India (RBI) is the central banking institution of India, which controls the monetary policy of the Indian rupee. It was established on April 1, 1935, during the British Raj, and nationalized on January 1, 1949, after India gained independence from British rule. The nationalization of RBI was a crucial step towards strengthening the financial sector and promoting economic development in India.
Explanation:
The correct answer to the question is option 'D' - RBI was nationalized in 1949. Here's an explanation of why this answer is correct:
1. Background:
Before the nationalization of RBI, it was a privately-owned institution. The bank was initially founded as a private shareholders' bank in 1935, with private individuals holding shares in the bank. However, with the increasing role and significance of RBI in managing India's monetary policy, there was a need for it to be brought under public ownership.
2. Objective of Nationalization:
The nationalization of RBI aimed to achieve the following objectives:
- Increase public control: Nationalization aimed to bring the central bank under public ownership to ensure that it serves the best interests of the nation as a whole. By making RBI a public institution, the government could exercise greater control over its policies and operations.
- Strengthen financial stability: Nationalization was seen as a crucial step in strengthening the stability of India's financial sector. It aimed to enhance the resilience of the banking system and ensure the soundness of monetary policy decisions.
- Promote economic development: By nationalizing RBI, the government aimed to align the central bank's objectives with the broader goals of economic development and social welfare. It provided an opportunity to direct RBI's efforts towards promoting inclusive growth and financial inclusion.
3. Nationalization Process:
The nationalization of RBI took place on January 1, 1949, through the Reserve Bank (Transfer to Public Ownership) Act, 1948. This act transferred the ownership and control of RBI from private shareholders to the central government. As a result, the shares held by private individuals were canceled, and the capital of RBI was entirely owned by the government.
4. Impact of Nationalization:
The nationalization of RBI had several positive impacts on the Indian economy:
- Increased accountability: With the government taking control of RBI, there was enhanced accountability in the functioning of the central bank. It became more transparent in its operations and was accountable to the public and the government.
- Strengthened monetary policy: Nationalization allowed RBI to have greater control over monetary policy decisions. It could now formulate policies in line with the government's objectives and respond effectively to economic challenges.
- Promoted financial stability: Nationalization played a crucial role in promoting financial stability in India. RBI could now regulate and supervise banks more effectively, ensuring the stability and integrity of the banking system.
Conclusion:
The nationalization of RBI in 1949 was a significant step towards strengthening the financial sector and promoting economic development in India. It increased public control over the central bank, enhanced accountability, and helped in achieving monetary and financial stability. The nationalization process was carried out through the Reserve Bank (Transfer to Public Ownership) Act, 1948, and marked a new era in the history of RBI and India's banking system.
The Reserve Bank of India (RBI) is the central banking institution of India, which controls the monetary policy of the Indian rupee. It was established on April 1, 1935, during the British Raj, and nationalized on January 1, 1949, after India gained independence from British rule. The nationalization of RBI was a crucial step towards strengthening the financial sector and promoting economic development in India.
Explanation:
The correct answer to the question is option 'D' - RBI was nationalized in 1949. Here's an explanation of why this answer is correct:
1. Background:
Before the nationalization of RBI, it was a privately-owned institution. The bank was initially founded as a private shareholders' bank in 1935, with private individuals holding shares in the bank. However, with the increasing role and significance of RBI in managing India's monetary policy, there was a need for it to be brought under public ownership.
2. Objective of Nationalization:
The nationalization of RBI aimed to achieve the following objectives:
- Increase public control: Nationalization aimed to bring the central bank under public ownership to ensure that it serves the best interests of the nation as a whole. By making RBI a public institution, the government could exercise greater control over its policies and operations.
- Strengthen financial stability: Nationalization was seen as a crucial step in strengthening the stability of India's financial sector. It aimed to enhance the resilience of the banking system and ensure the soundness of monetary policy decisions.
- Promote economic development: By nationalizing RBI, the government aimed to align the central bank's objectives with the broader goals of economic development and social welfare. It provided an opportunity to direct RBI's efforts towards promoting inclusive growth and financial inclusion.
3. Nationalization Process:
The nationalization of RBI took place on January 1, 1949, through the Reserve Bank (Transfer to Public Ownership) Act, 1948. This act transferred the ownership and control of RBI from private shareholders to the central government. As a result, the shares held by private individuals were canceled, and the capital of RBI was entirely owned by the government.
4. Impact of Nationalization:
The nationalization of RBI had several positive impacts on the Indian economy:
- Increased accountability: With the government taking control of RBI, there was enhanced accountability in the functioning of the central bank. It became more transparent in its operations and was accountable to the public and the government.
- Strengthened monetary policy: Nationalization allowed RBI to have greater control over monetary policy decisions. It could now formulate policies in line with the government's objectives and respond effectively to economic challenges.
- Promoted financial stability: Nationalization played a crucial role in promoting financial stability in India. RBI could now regulate and supervise banks more effectively, ensuring the stability and integrity of the banking system.
Conclusion:
The nationalization of RBI in 1949 was a significant step towards strengthening the financial sector and promoting economic development in India. It increased public control over the central bank, enhanced accountability, and helped in achieving monetary and financial stability. The nationalization process was carried out through the Reserve Bank (Transfer to Public Ownership) Act, 1948, and marked a new era in the history of RBI and India's banking system.
The rate at which discounting of bills of first class is done by RBI is called- a)Bank rate
- b)Prime Lending rate
- c)Repo rate
- d)None of the above
Correct answer is option 'A'. Can you explain this answer?
The rate at which discounting of bills of first class is done by RBI is called
a)
Bank rate
b)
Prime Lending rate
c)
Repo rate
d)
None of the above
|
|
Arun Khanna answered |
A bank rate is the interest rate at which a nation's central bank lends money to domestic banks, often in the form of very short-term loans. Managing the bank rate is a method by which central banks affect economic activity. Lower bank rates can help to expand the economy by lowering the cost of funds for borrowers, and higher bank rates help to reign in the economy when inflation is higher than desired.
Buying and selling of securities or bills in open market is called:- a)Cash Reserve Ratio
- b)Open Market operation
- c)Bank rate policy
- d)None of these
Correct answer is option 'B'. Can you explain this answer?
Buying and selling of securities or bills in open market is called:
a)
Cash Reserve Ratio
b)
Open Market operation
c)
Bank rate policy
d)
None of these
|
|
Sameer Jain answered |
Open Market Operation
Open market operation refers to the buying and selling of securities or bills by a central bank in the open market. It is one of the important tools used by central banks to control the money supply and influence interest rates in an economy. Open market operations are conducted regularly to manage liquidity in the banking system and achieve desired monetary policy objectives.
How Open Market Operations Work
Open market operations involve the central bank buying or selling government securities, such as bonds or treasury bills, from or to commercial banks and other financial institutions. These transactions are typically conducted through auctions, where the central bank specifies the amount, maturity, and interest rate of the securities it wishes to buy or sell.
Objectives of Open Market Operations
The central bank carries out open market operations to achieve various monetary policy objectives, including:
1. Controlling Inflation: By buying securities, the central bank increases the money supply, allowing banks to lend more. This stimulates economic activity and can help combat deflation. Conversely, by selling securities, the central bank reduces the money supply, which can help control inflationary pressures.
2. Managing Interest Rates: Open market operations influence interest rates by affecting the amount of money available for lending. When the central bank buys securities, it injects funds into the banking system, increasing liquidity and lowering interest rates. Conversely, when it sells securities, it reduces liquidity, leading to higher interest rates.
3. Ensuring Financial Stability: Open market operations help maintain stability in the financial system by providing liquidity to banks and financial institutions when needed. By buying securities during times of financial stress, the central bank supports the functioning of the banking sector and ensures the smooth operation of financial markets.
Impact of Open Market Operations
Open market operations have a direct impact on the money supply and interest rates, which in turn affect economic activity. When the central bank buys securities, it increases the money supply, leading to lower interest rates, increased borrowing, and higher investment and consumption. Conversely, when the central bank sells securities, it decreases the money supply, resulting in higher interest rates, reduced borrowing, and lower investment and consumption.
Conclusion
Open market operations play a crucial role in the implementation of monetary policy. By buying and selling securities in the open market, central banks can effectively manage liquidity, control inflation, influence interest rates, and ensure financial stability. These operations are an essential tool for central banks to achieve their monetary policy objectives and promote economic stability.
Open market operation refers to the buying and selling of securities or bills by a central bank in the open market. It is one of the important tools used by central banks to control the money supply and influence interest rates in an economy. Open market operations are conducted regularly to manage liquidity in the banking system and achieve desired monetary policy objectives.
How Open Market Operations Work
Open market operations involve the central bank buying or selling government securities, such as bonds or treasury bills, from or to commercial banks and other financial institutions. These transactions are typically conducted through auctions, where the central bank specifies the amount, maturity, and interest rate of the securities it wishes to buy or sell.
Objectives of Open Market Operations
The central bank carries out open market operations to achieve various monetary policy objectives, including:
1. Controlling Inflation: By buying securities, the central bank increases the money supply, allowing banks to lend more. This stimulates economic activity and can help combat deflation. Conversely, by selling securities, the central bank reduces the money supply, which can help control inflationary pressures.
2. Managing Interest Rates: Open market operations influence interest rates by affecting the amount of money available for lending. When the central bank buys securities, it injects funds into the banking system, increasing liquidity and lowering interest rates. Conversely, when it sells securities, it reduces liquidity, leading to higher interest rates.
3. Ensuring Financial Stability: Open market operations help maintain stability in the financial system by providing liquidity to banks and financial institutions when needed. By buying securities during times of financial stress, the central bank supports the functioning of the banking sector and ensures the smooth operation of financial markets.
Impact of Open Market Operations
Open market operations have a direct impact on the money supply and interest rates, which in turn affect economic activity. When the central bank buys securities, it increases the money supply, leading to lower interest rates, increased borrowing, and higher investment and consumption. Conversely, when the central bank sells securities, it decreases the money supply, resulting in higher interest rates, reduced borrowing, and lower investment and consumption.
Conclusion
Open market operations play a crucial role in the implementation of monetary policy. By buying and selling securities in the open market, central banks can effectively manage liquidity, control inflation, influence interest rates, and ensure financial stability. These operations are an essential tool for central banks to achieve their monetary policy objectives and promote economic stability.
CRR according to July 2013, was:- a)4%
- b)7%
- c)10%
- d)2%
Correct answer is option 'A'. Can you explain this answer?
CRR according to July 2013, was:
a)
4%
b)
7%
c)
10%
d)
2%
|
Jayant Mishra answered |
In addition to the mandatory amount of 4.5% of common equity tier 1 capital requirement set out in the capital requirements regulation (CRR), all banks are required to hold a capital conservation buffer and a counter cyclical capital buffer, to ensure that they accumulate a sufficient capital base in prosperous times to.
Which of the following is not a function of the RBI?- a)Issue of currency
- b)Banker’s Bank
- c)Regulation of Foreign Trade
- d)Custodian of Forex Reserves.
Correct answer is option 'C'. Can you explain this answer?
Which of the following is not a function of the RBI?
a)
Issue of currency
b)
Banker’s Bank
c)
Regulation of Foreign Trade
d)
Custodian of Forex Reserves.
|
|
Deepika Desai answered |
Of the governmentc)Regulation of stock marketd)Regulation of credit policies of banksAnswer: c) Regulation of stock market
Rs. 10 note is issued by:- a)SBI
- b)RBI
- c)Government
- d)Ministry of Finance
Correct answer is option 'B'. Can you explain this answer?
Rs. 10 note is issued by:
a)
SBI
b)
RBI
c)
Government
d)
Ministry of Finance
|
|
Jayant Mishra answered |
The Indian 10-rupee banknote (₹10) is a common denomination of the Indian rupee. The ₹10 note was one of the first notes introduced by the Reserve Bank of India as a part of the Mahatma Gandhi Series in 1996, which is presently in circulation
In order to control credit_________- a)Bank rate should be decreased and CRR should be increase
- b)Bank rate should be reduced and CRR should be reduced
- c)Bank rate should be increased and CRR should also be increased
- d)Bank rate should be increased and CRR should be decreased
Correct answer is 'C'. Can you explain this answer?
In order to control credit_________
a)
Bank rate should be decreased and CRR should be increase
b)
Bank rate should be reduced and CRR should be reduced
c)
Bank rate should be increased and CRR should also be increased
d)
Bank rate should be increased and CRR should be decreased
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Poonam Reddy answered |
Bank rate is the rate at which central bank lends money to the commercial bank. If bank rate will increase, commercial banks will borrow less and so will have less liquidity to provide for loans. CRR is cash reserve ratio. When people deposit money in banks, the bank out of the total deposit keeps a % of the amount with the central bank. So if CRR will increase banks will have to keep a greater %of the total deposit with central bank and will thus have less money to provide loans. In this way the central bank can control money supply in the economy.
Monetary Policy in India is regulated by :- a)Ministry of Finance
- b)R.B.I
- c)Planning Commission
- d)SEBI
Correct answer is 'B'. Can you explain this answer?
Monetary Policy in India is regulated by :
a)
Ministry of Finance
b)
R.B.I
c)
Planning Commission
d)
SEBI
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Nandini Iyer answered |
The Reserve Bank of India (RBI) uses the monetary policy to regulate liquidity in a manner that balances inflation and help in GDP growth and development.
Which of the following is not a qualitative method of credit control?- a)Credit Rationing
- b)Changes in cash reserve of Commercial banks.
- c)Publicity and Notification
- d)Regulation of consumer credit.
Correct answer is option 'B'. Can you explain this answer?
Which of the following is not a qualitative method of credit control?
a)
Credit Rationing
b)
Changes in cash reserve of Commercial banks.
c)
Publicity and Notification
d)
Regulation of consumer credit.
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Shanaya Deshpande answered |
Qualitative Credit Control Methods
Qualitative credit control methods are those methods that are used by the central bank to influence the credit creation capacity of the commercial banks. They do not involve any direct intervention in the money market by the central bank. The following methods are used as qualitative credit control methods:
a) Credit Rationing: In this method, the central bank controls the credit supply by giving instructions to the commercial banks to limit the amount of credit they can extend to their customers.
b) Publicity and Notification: The central bank uses this method to make the public aware of the credit policies of the government to influence their borrowing and lending decisions.
c) Regulation of consumer credit: The central bank regulates consumer credit by imposing restrictions on the amount of credit that can be extended for the purchase of certain goods and services.
d) Moral Suasion: This method involves the central bank using its influence and credibility to persuade the commercial banks to follow certain credit policies.
Non-Qualitative Credit Control Method
e) Changes in cash reserve of Commercial banks: This is a quantitative method of credit control. The central bank changes the minimum cash reserve ratio that commercial banks are required to maintain with the central bank. This method directly affects the money supply in the economy and is a powerful tool in the hands of the central bank.
Correct answer: B (Changes in cash reserve of Commercial banks)
Explanation: Changes in cash reserve ratio is a quantitative method of credit control, as it directly affects the money supply in the economy. It does not come under the purview of qualitative credit control methods, which are indirect methods of influencing credit creation.
Qualitative credit control methods are those methods that are used by the central bank to influence the credit creation capacity of the commercial banks. They do not involve any direct intervention in the money market by the central bank. The following methods are used as qualitative credit control methods:
a) Credit Rationing: In this method, the central bank controls the credit supply by giving instructions to the commercial banks to limit the amount of credit they can extend to their customers.
b) Publicity and Notification: The central bank uses this method to make the public aware of the credit policies of the government to influence their borrowing and lending decisions.
c) Regulation of consumer credit: The central bank regulates consumer credit by imposing restrictions on the amount of credit that can be extended for the purchase of certain goods and services.
d) Moral Suasion: This method involves the central bank using its influence and credibility to persuade the commercial banks to follow certain credit policies.
Non-Qualitative Credit Control Method
e) Changes in cash reserve of Commercial banks: This is a quantitative method of credit control. The central bank changes the minimum cash reserve ratio that commercial banks are required to maintain with the central bank. This method directly affects the money supply in the economy and is a powerful tool in the hands of the central bank.
Correct answer: B (Changes in cash reserve of Commercial banks)
Explanation: Changes in cash reserve ratio is a quantitative method of credit control, as it directly affects the money supply in the economy. It does not come under the purview of qualitative credit control methods, which are indirect methods of influencing credit creation.
The objectives of monetary policy are ______.- a)Price stability
- b)Exchange rate stability
- c)Employment generation
- d)All of the above
Correct answer is option 'A'. Can you explain this answer?
The objectives of monetary policy are ______.
a)
Price stability
b)
Exchange rate stability
c)
Employment generation
d)
All of the above
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Yash Falia answered |
Monetary policy are controlled by RBI. Through monetary policy they assure Price stability. In the Inflation period were goods and services prices become high, the RBI use monetary policy to stabilize the market by incresing the rate crr, slr, reverse repo rate etc. through this currency flow in market become low so demands fall this result prices fall. Infation controlled. and vise-vesa in deflation.
Lender of the last resort means :- a)The Government coming to the rescue of sick industries.
- b)Central Bank coming to the rescue of banks in times of financial crisis.
- c)Both
- d)None
Correct answer is option 'B'. Can you explain this answer?
Lender of the last resort means :
a)
The Government coming to the rescue of sick industries.
b)
Central Bank coming to the rescue of banks in times of financial crisis.
c)
Both
d)
None
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Alok Mehta answered |
The correct answer is: b) Central Bank coming to the rescue of banks in times of financial crisis.
The "lender of last resort" is a term used to describe a financial institution, usually a central bank, that is able to provide funding to banks or other financial institutions during times of financial crisis. This can help to stabilize the financial system and prevent a potential collapse. The lender of last resort is typically seen as a backstop, and its role is to provide funding when other sources of funding are not available or are insufficient. This can include providing loans, purchasing assets, or other forms of financial assistance to help banks meet their financial obligations and maintain stability. The lender of last resort is not typically involved in bailing out sick industries, although governments may sometimes provide support to industries in distress as a matter of policy.
The rate at which the RBI rediscounts the Bills of Commercial banks is known as. - a)Repo rate
- b)Bank rate
- c)SLR
- d)CRR
Correct answer is option 'B'. Can you explain this answer?
The rate at which the RBI rediscounts the Bills of Commercial banks is known as.
a)
Repo rate
b)
Bank rate
c)
SLR
d)
CRR
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Snehal Das answered |
The Bank Rate is the rate at which the Reserve Bank of India (RBI) rediscounts the Bills of Commercial banks. It is also known as the Discount Rate. The bank rate is an important tool used by the RBI to control the money supply and inflation in the economy. It is the rate at which the central bank lends money to commercial banks against their eligible securities.
Importance of Bank Rate
Bank rate plays an important role in the economy as it affects the cost of borrowing for commercial banks, which in turn affects the lending rates offered by them. Higher bank rates increase the cost of borrowing for commercial banks, which leads to an increase in lending rates. This, in turn, reduces the demand for credit and helps control inflation.
On the other hand, a lower bank rate reduces the cost of borrowing for commercial banks, which leads to a reduction in lending rates. This increases the demand for credit, which helps stimulate economic growth.
Conclusion
Thus, the bank rate is an important tool used by the RBI to control the money supply and inflation in the economy. It is the rate at which the central bank lends money to commercial banks against their eligible securities. The higher the bank rate, the higher the cost of borrowing for commercial banks, which leads to an increase in lending rates. Conversely, a lower bank rate leads to a reduction in lending rates, which increases the demand for credit and stimulates economic growth.
Importance of Bank Rate
Bank rate plays an important role in the economy as it affects the cost of borrowing for commercial banks, which in turn affects the lending rates offered by them. Higher bank rates increase the cost of borrowing for commercial banks, which leads to an increase in lending rates. This, in turn, reduces the demand for credit and helps control inflation.
On the other hand, a lower bank rate reduces the cost of borrowing for commercial banks, which leads to a reduction in lending rates. This increases the demand for credit, which helps stimulate economic growth.
Conclusion
Thus, the bank rate is an important tool used by the RBI to control the money supply and inflation in the economy. It is the rate at which the central bank lends money to commercial banks against their eligible securities. The higher the bank rate, the higher the cost of borrowing for commercial banks, which leads to an increase in lending rates. Conversely, a lower bank rate leads to a reduction in lending rates, which increases the demand for credit and stimulates economic growth.
__________ is the Banker’s Bank in India:- a)SBI
- b)PNB
- c)RBI
- d)OBC
Correct answer is option 'C'. Can you explain this answer?
__________ is the Banker’s Bank in India:
a)
SBI
b)
PNB
c)
RBI
d)
OBC
|
|
Freedom Institute answered |
C: RBI
The Reserve Bank of India (RBI) is the banker's bank in India. This means that the RBI acts as a central bank for all the commercial banks in the country and performs a variety of functions on their behalf.
Some of the key functions of the RBI as the banker's bank in India include:
- Providing liquidity support to commercial banks: The RBI acts as a lender of last resort for commercial banks, providing them with financial assistance in times of need.
- Regulating and supervising the banking system: The RBI is responsible for regulating and supervising the activities of commercial banks to ensure the stability of the financial system.
- Acting as a clearinghouse for interbank transactions: The RBI acts as a clearinghouse for interbank transactions, facilitating the settlement of transactions between banks and helping to maintain the smooth functioning of the payment and settlement system.
- Providing a variety of services to commercial banks: The RBI provides a range of services to commercial banks, such as currency management, government securities operations, and foreign exchange operations.
The State Bank of India (SBI), Punjab National Bank (PNB), and Oriental Bank of Commerce (OBC) are all commercial banks in India and are not responsible for performing the functions of a central bank.
Chapter doubts & questions for Banking - Crash Course of Macro Economics -Class 12 2025 is part of Commerce exam preparation. The chapters have been prepared according to the Commerce exam syllabus. The Chapter doubts & questions, notes, tests & MCQs are made for Commerce 2025 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests here.
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Crash Course of Macro Economics -Class 12
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