Banking Sector: Inflation & RBI- 2 - UPSC MCQ

The base year to calculate CPI-AL is 1986-87 and 260 items are included in the index.

The base year to calculate CPI-UNME is 1984-85. 180 items are included in the index.

Proportional reserve system has been replaced by minimum reserve system.

RBI performs central banking functions as well as development and promotional functions.

RBI provides advice in all monetary matters including agriculture and industrial finance. RBI is obliged to transact business of central government and state governments including J&K.

RBI is also responsible for regulating banks, directs their credit policies and provides advice to them.

The amount a bank needs to maintain in form of cash, gold and other securities before giving credit is called SLR.

The percentage of demand and time liabilities that banks have to keep with RBI is called cash reserve ratio.

RBI is responsible for transaction of the currencies of IMF countries.

RBI has a set of supervisory functions too.

Bank rate is the rate at which banks can borrow from RBI when in need of funds.

CRR, SLR and OMO are various tools in the hands of RBI to influence money supply in the economy.

Union taxes are given in the list of 7th schedule in the constitution.

Taxes levied by the state government include Sales tax, VAT, tax of land & buildings, tax of agricultural income, stamp duty, luxury tax, dividend distribution tax  and entertainment tax. 

Central government has exclusive power to impose tax which is not mentioned in state or concurrent list.

It is based on the principle of ability to pay. The tax levied by the union government on income of individuals is known as income tax.

The tax on net income of companies is corporate tax. Tax rates are uniform for all categories of companies.

Wealth tax is collected from unproductive assets only. Estate duty was abolished in 1985.

Interest tax was withdrawn in 2000-01, estate duty abolished in 1985 and gift tax in 1998-99.

Sales tax is the tax on sale of goods and is influenced by the value added tax system.