RBI & Policy — Set 4
Economics · RBI और नीति · Questions 31–40 of 120
Which city houses the RBI's 'College of Agricultural Banking'?
Correct Answer: C. Pune
The College of Agricultural Banking (CAB) is located in Pune and is a premier training institute of the RBI. it focuses on training officers from banks and cooperatives in rural and agricultural finance. This helps in improving financial inclusion and credit flow to farmers.
Who signs the currency notes of ₹20 denomination in India?
Correct Answer: C. RBI Governor
All currency notes in India, from ₹2 upwards, bear the signature of the Governor of the RBI. This signifies the RBI's promise to pay the bearer the sum indicated. Only the ₹1 note carries the signature of the Finance Secretary.
The 'LAF' (Liquidity Adjustment Facility) allows banks to manage their daily liquidity through?
Correct Answer: D. Repo and Reverse Repo
LAF was introduced in 2000 based on the Narasimham Committee recommendations. It enables banks to borrow or lend funds to the RBI on a daily basis using government securities as collateral. This mechanism helps the RBI in keeping the call money rate close to the repo rate.
When the RBI acts as "Lender of Last Resort", which specific function does it perform for commercial banks?
Correct Answer: B. Providing emergency liquidity to banks facing a crisis
As the Lender of Last Resort, the RBI provides emergency liquidity assistance to commercial banks that face a sudden shortage of funds and cannot borrow from the market. This prevents bank failures and maintains systemic financial stability. Banks approach the RBI through the Marginal Standing Facility (MSF) or through repo operations for such assistance. This role is crucial in preventing bank runs, as it assures depositors that their bank can always access funds from the central bank. This function distinguishes a central bank from commercial banks.
Which subsidiary of the RBI is responsible for printing currency notes?
Correct Answer: D. BRBNMPL
Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL) operates the printing presses in Mysuru and Salboni. It was established in 1995 to enhance note production capacity. The RBI also uses government-owned presses for currency production.
Which component constitutes the largest share of India's Foreign Exchange Reserves managed by the RBI?
Correct Answer: C. Foreign Currency Assets (FCA)
Foreign Currency Assets (FCA) form the largest component of India's Foreign Exchange Reserves, typically accounting for over 90% of the total reserves. These are assets held in major foreign currencies like the US Dollar, Euro, Pound Sterling, and Japanese Yen. The RBI maintains these reserves to stabilize the rupee exchange rate, meet international payment obligations, and provide confidence to foreign investors. Gold reserves, Special Drawing Rights (SDRs), and the Reserve Tranche Position in the IMF are the other three components of India's forex reserves.
Under which system does the RBI issue currency notes currently?
Correct Answer: D. Minimum Reserve System
The Minimum Reserve System was adopted in 1956, replacing the proportional system. Under this, the RBI must maintain a minimum reserve of ₹200 crore in gold and foreign securities. Out of this, gold must be worth at least ₹115 crore.
Which organization is responsible for insuring bank deposits in India?
Correct Answer: D. DICGC
The Deposit Insurance and Credit Guarantee Corporation (DICGC) is a wholly-owned subsidiary of the RBI. It currently insures each depositor up to ₹5 lakh in a bank. This insurance covers both principal and interest amounts in case of a bank failure.
What happens to the money supply in the economy when the RBI increases the CRR?
Correct Answer: A. It decreases
An increase in the Cash Reserve Ratio forces banks to lock away more funds with the RBI. This reduces the amount of money available for banks to lend to the public. Consequently, the overall money supply in the economy decreases.
Which of the following describes the 'Bank Rate' in the current context?
Correct Answer: D. Penalty rate for reserve defaults
Currently, the Bank Rate is aligned with the MSF rate and acts as a penal rate. It is charged if a bank fails to maintain the required CRR or SLR levels. It no longer serves as the primary tool for injecting liquidity into the system.