All questions of Banking of India for BPSC (Bihar) Exam

Understanding the Pairs
Let’s evaluate each pair to determine how many are correctly matched.
1. Repo rate : Policy rate set by the central bank
- This pair is correctly matched.
- The repo rate is indeed the rate at which the central bank lends money to commercial banks, acting as a key tool for monetary policy.
2. 91-day Treasury Bill yield : Long-term government security yield
- This pair is incorrectly matched.
- A 91-day Treasury Bill is a short-term security, typically issued for 3 months, which means its yield is associated with short-term financing rather than long-term.
3. 182-day Treasury Bill yield : Short-term government security yield
- This pair is correctly matched.
- Similar to the 91-day Treasury Bill, a 182-day Treasury Bill is also a short-term security, making this pair accurate.
4. Basel III norms : Prudential regulatory framework for banks
- This pair is correctly matched.
- Basel III is indeed a global regulatory framework established to strengthen bank capital requirements and promote financial stability.
Conclusion: Count of Correct Matches
- Correct matches: 1 (Repo rate) + 1 (182-day Treasury Bill yield) + 1 (Basel III norms) = 3 pairs.
- Incorrect match: 2 (91-day Treasury Bill yield).
Thus, the correct answer is that only three pairs are correctly matched, making option 'C' the right choice.

Understanding Cash Reserve Ratio (CRR)
The Cash Reserve Ratio (CRR) is a crucial monetary policy tool used by the Reserve Bank of India (RBI) to regulate the amount of funds that banks must hold as reserves.
CRR Mandate for Banks
- The CRR mandates that banks in India must maintain a certain percentage of their total deposits with the RBI in cash form.
- This requirement is significant as it ensures the liquidity and stability of the banking system, allowing the RBI to control inflation and ensure financial discipline among banks.
Purpose of Maintaining CRR
- Liquidity Management: By requiring banks to hold a portion of their deposits as reserves, the RBI can manage the liquidity in the economy effectively.
- Control of Inflation: A higher CRR reduces the amount of money banks can lend, which can help in controlling inflation.
- Financial Stability: This requirement acts as a safeguard against bank runs and ensures that banks have sufficient funds available to meet withdrawal demands.
Impact on Banking Operations
- Banks cannot utilize the money held as CRR for lending or investment purposes, which directly impacts their ability to generate income.
- However, maintaining CRR is crucial for building trust and ensuring that banks are functioning within regulatory frameworks.
In summary, option 'B' is correct as it accurately describes the requirement for banks to maintain a part of their total deposits with the RBI in cash form, which is essential for the overall health of the financial system in India.

Analysis of Statements
To determine the correctness of the statements regarding India's monetary policy and banking reforms, let’s analyze each one in detail.
Statement 1: Status Quo on Repo Rate Until January 2022
- This statement is incorrect. The MPC of India actually began increasing the repo rate in May 2022, reacting to rising inflation. Prior to that, the repo rate had been held steady, but it did not maintain a status quo until January 2022.
Statement 2: Monetary Tightening Cycle in April 2022
- This statement is correct. The RBI initiated a monetary tightening cycle in April 2022 as headline inflation crossed the upper limit of its tolerance band (which is typically set at 6%). The MPC raised interest rates to curb inflationary pressures.
Statement 3: Banking Consolidation Process in 1998
- This statement is incorrect. The banking consolidation process in India began following the recommendations of the Narasimham Committee in 1991, not in 1998. The committee laid the groundwork for reforms in the banking sector aimed at enhancing efficiency and stability.
Conclusion
Based on the analysis:
- Correct Statements: Only Statement 2 is accurate.
- Final Answer: The correct option is B) 1 and 2 Only.