RBI & Policy — Set 7
Economics · RBI और नीति · Questions 61–70 of 120
Which of the following describes 'Quantitative Easing'?
Correct Answer: C. Buying securities to increase money supply
The correct answer is 'Buying securities to increase money supply'. Quantitative Easing is an unconventional policy where a central bank buys large quantities of financial assets to lower interest rates. It is used when traditional tools like the policy rate are already near zero. It aims to stimulate the economy by increasing bank reserves.
The 'Legal Tender' status of a currency note means?
Correct Answer: A. It must be accepted for the discharge of debt
Legal tender is any form of money that courts of law are required to recognize as satisfactory payment for any monetary debt. In India, currency notes issued by the RBI are legal tender throughout the country. Refusing valid legal tender for payments is generally not allowed by law.
Which department in the RBI acts as the regulator for Non-Banking Financial Companies (NBFCs)?
Correct Answer: B. Department of Regulation
The Department of Regulation (DoR) frames the rules and policy guidelines for banks and NBFCs. It ensures that these entities follow prudential norms to protect depositors' interests. The RBI has increased its oversight of NBFCs in recent years due to their growing systemic importance.
What is the 'Real Effective Exchange Rate' (REER) monitored by the RBI?
Correct Answer: C. Weighted average adjusted for inflation
REER is a weighted average of a currency's value relative to an index of other major currencies, adjusted for inflation. It provides a measure of a country's international price competitiveness. A rising REER indicates that the country's exports are becoming more expensive.
The RBI's 'Ombudsman Scheme' is intended for?
Correct Answer: B. Redressing customer grievances against banks
The Banking Ombudsman Scheme allows customers to resolve complaints about deficiencies in banking services for free. It is a quasi-judicial authority created by the RBI. The scheme covers a wide range of issues, from ATM errors to unauthorized transactions.
Which committee recommended the 'Chain of Command' and localized structure of the RBI?
Correct Answer: B. Hilton Young Commission
The Hilton Young Commission envisioned the RBI as a centralized authority with local influence through regional boards. This structure was designed to manage the vast and diverse financial landscape of India. The primary goal was to ensure uniformity in monetary policy across provinces.
What is 'Sterilization' in the context of RBI's foreign exchange operations?
Correct Answer: B. Offsetting the impact of forex intervention on money supply
When the RBI buys dollars to prevent rupee appreciation, it releases rupees into the market, which can cause inflation. Sterilization involves selling government bonds to mop up this extra rupee liquidity. This process keeps the domestic money supply stable while managing the exchange rate.
The RBI issues licenses to Small Finance Banks under which section of the RBI Act?
Correct Answer: D. Section 22 of BR Act
The correct answer is 'Section 22 of BR Act'. While the RBI Act is the mother act, the power to license all types of banks comes from the Banking Regulation Act, 1949. Small Finance Banks are specialized banks aimed at financial inclusion for small businesses and farmers. They must comply with specific capital and lending requirements set by the RBI.
What is the 'Reserve Bank Information Technology Private Limited' (ReBIT)?
Correct Answer: B. RBI's IT subsidiary
The correct answer is 'RBI's IT subsidiary'. ReBIT was set up by the RBI to take care of its IT requirements, including cyber security needs. it helps in strengthening the resilience of the financial sector against cyber threats. ReBIT also assists the RBI in conducting IT audits of regulated entities.
Which of the following is a component of 'M1' (Narrow Money) as defined by the RBI?
Correct Answer: D. Currency with public + Demand deposits
M1 is the most liquid form of money supply and includes currency in circulation and demand deposits (like savings and current accounts). It represents money that can be immediately used for transactions. The RBI monitors different measures of money supply from M0 to M4.