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If the RBI adopts an expansionist open market operations policy, this means that it will
  • a)
    buy securities from non-government holders
  • b)
    sell securities in the open market
  • c)
    offer the commercial banks more credit in the open market
  • d)
    openly announce to the market that it intends to expand credit
  • e)
    stop the printing of the currency
Correct answer is option 'A'. Can you explain this answer?
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If the RBI adopts an expansionist open market operations policy, this...
'Open market operations' (OMO) refers to the buying and selling of government securities in the open market in order to expand or contract the amount of money in the banking system, facilitated by the Federal Reserve.
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Directions: Read the passage carefully and select the best answer to each question out of the given five alternatives.In a bid to ensure timely support to depositors of stressed banks, the government may bring amendment to DICGC Act in the monsoon session with the objective to provide account holders easy and time-bound access to funds to the extent of the deposit insurance cover. Last year, the government raised insurance cover on deposit five-folds to Rs 5 lakh with a view to provide support to depositors of ailing lenders like Punjab and Maharashtra Co-operative (PMC) Bank. Following the collapse of PMC Bank, Yes Bank and Lakshmi Vilas Bank NSE 4.79 % too came under stress leading to restructuring by the regulator and the government.The amendment to the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act, 1961 is the budget announcement made by the Finance Minister and the Bill is almost ready, sources said. It is expected that the Bill will be tabled in the upcoming monsoon session after being vetted by the Union Cabinet, sources added. Once the Bill becomes the law, it will provide immediate relief to thousands of depositors who had their money parked in stressed lenders such as PMC Bank and other small cooperative banks.As per the current provisions, the deposit insurance of up to Rs 5 lakh comes into play when the licence of a bank is cancelled and liquidation process starts. DICGC, a wholly-owned subsidiary of the Reserve Bank of India, provides insurance cover on bank deposits. Finance Minister Nirmala Sitharaman in the Budget speech in February said the government had approved an increase in the Deposit Insurance cover from Rs 1 lakh to Rs 5 lakh for bank customers last year. It could not be presented in the Budget session due to curtailment of the last session following the spread of the second wave of COVID-19 pandemic.It is to be noted that the enhanced deposit insurance cover of Rs 5 lakh is effective from February 4, 2020. The increase was done after a gap of 27 years as it was static since 1993. The cover is provided by the Deposit Insurance and Credit Guarantee Corporation (DICGC), a wholly-owned subsidiary of the RBI. With increased insurance cover, the banks are paying a higher premium of 12 paise against 10 paise per Rs 100 deposited without any additional burden on account holders. The deposit insurance scheme covers all banks operating in India, including private sector, cooperative, and even branches of foreign banks. There are some exemptions such as deposits of foreign governments, deposits of central and state governments, and inter-bank deposits.It can be recalled that way back in 2009, the Raghuram Rajan committee on financial sector reforms had recommended strengthening the capacity of the DICGC, a more explicit system of prompt, corrective action, and making deposit insurance premia more risk-based.Q. What is the main reason to make an amendment in the law?

Direction: Read the passage carefully and select the best answer to each question out of the given five alternatives.Banks will conduct special clearing operations for annual closure of government accounts on March 31, which is the last day of the current fiscal year, the RBI has said. The Reserve Bank has issued directions to the banks for smooth clearing operation and asked them to mandatorily participate in it. With regard to annual closing of accounts related transactions of the central and state governments, special measures are put in place for 2020-21, the RBI has instructed all the member banks to maintain sufficient balance in their clearing settlement account. Normal clearing timings as applicable to any working Wednesday shall be followed on March 31, 2021, the RBI said in a notification addressed to the member banks, urban and state cooperative banks, payments banks, small finance banks as well as the NPCI. To facilitate accounting of all the government transactions for the current financial year 2020-21 by March 31, 2021, it has been decided to conduct special clearing exclusively for government cheques across the three CTS grids on March 31, 2021, the RBI said.Under this, presentation clearing will take place between 1700 to 1730 hrs and return clearing will take place between 1900 and 1930 hrs at the three CTS (cheque truncation system) grids located in New Delhi, Chennai and Mumbai. “It is mandatory for all banks to participate in the special clearing operations on March 31, 2021. All the member banks under the respective CTS grids are required to keep their inward clearing processing infrastructure open during the special clearing hours and maintain sufficient balance in their clearing settlement account to meet settlement obligations arising out of the special clearing,” said the regulator. Besides, it has asked the banks under the respective CTS grids to adhere to the instructions issued to them by the President of the respective CTS grid. Under the CTS system, there is no need to present a cheque physically for clearance, instead an electronic image is being transmitted to the paying branch through the clearing house, with the relevant data. This eliminates the cost of movement of the physical cheques and reduces time for collection and clearance of cheques. All government transactions done by agency banks for 2020-21 must be accounted for within the same financial year, the RBI said. The central bank said all agency banks should keep their designated branches open for over the counter transactions related to government transactions up to the normal working hours on March 31, 2021. “Transactions through National Electronic Funds Transfer (NEFT) and Real Time Gross Settlement (RTGS) System will continue up to 2400 hours as hitherto on March 31, 2021. “Special clearing will be conducted for collection of government cheques on March 31, 2021 for which the Department of Payment and Settlement Systems (DPSS), RBI will issue necessary instructions,” it said. With regard to reporting of central and state government transactions to RBI, including uploading of GST/e-receipts luggage files, the reporting window of March 31, 2021 will be extended and kept open till 1200 hours on April 1, 2021, the RBI said.What can you say from the following sentence?"It is mandatory for all banks to participate in the special clearing operations on March 31, 2021”

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If the RBI adopts an expansionist open market operations policy, this means that it willa)buy securities from non-government holdersb)sell securities in the open marketc)offer the commercial banks more credit in the open marketd)openly announce to the market that it intends to expand credite)stop the printing of the currencyCorrect answer is option 'A'. Can you explain this answer?
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If the RBI adopts an expansionist open market operations policy, this means that it willa)buy securities from non-government holdersb)sell securities in the open marketc)offer the commercial banks more credit in the open marketd)openly announce to the market that it intends to expand credite)stop the printing of the currencyCorrect answer is option 'A'. Can you explain this answer? for Banking Exams 2024 is part of Banking Exams preparation. The Question and answers have been prepared according to the Banking Exams exam syllabus. Information about If the RBI adopts an expansionist open market operations policy, this means that it willa)buy securities from non-government holdersb)sell securities in the open marketc)offer the commercial banks more credit in the open marketd)openly announce to the market that it intends to expand credite)stop the printing of the currencyCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for Banking Exams 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for If the RBI adopts an expansionist open market operations policy, this means that it willa)buy securities from non-government holdersb)sell securities in the open marketc)offer the commercial banks more credit in the open marketd)openly announce to the market that it intends to expand credite)stop the printing of the currencyCorrect answer is option 'A'. Can you explain this answer?.
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