money supply, banking & financial institutions section 3 Practice Questions Answers Test with Solutions & More Shortcuts

Answer: (b)

“In terms of Section 42(1) of the RBI Act, 1934 the Reserve Bank, having regard to the needs of securing the monetary stability in the country, prescribes the CRR for Scheduled Commercial Banks (SCBs) without any floor or ceiling rate”.

The other purpose of CRR is to manage liquidity (RBI can increase CRR to decrease liquidity in the economy) and it also ensures that a part of the bank’s deposit is with the Central Bank and is hence, safe.

As a depositor, the CRR and SLR requirements together ensure that some portion of the deposits with Indian banks remain secure, even if banks make poor lending decisions.

In absence of the CRR and SLR requirements, to make more profits banks may lend most of the deposits and if there is a sudden rush to withdraw, banks will struggle to meet the repayments to the depositors. The maximum limit for SLR is 40%.

Answer: (a)

RBI has deregulated interest rates on term/ time deposits since Oct 1997.

RBI had deregulated interest rates on savings deposits since May 2011.

RBI regulates three categories of financial markets; money markets, government securities markets and foreign exchange markets.

Answer: (d)

Answer: (c)

Recently RBI included HDFC Bank under the list of DSIB, while SBI and ICICI were already in the list.

Answer: (c)

Government is planning a bank recapitalization program under which it will issue bonds of Rs. 80,000 crore in FY 2017-18.

This recapitalization programme has been integrated with an ambitious reform agenda, under the rubric of an "Enhanced Access and Service Excellence (EASE)" programme and the six pillars to achieve this include

1. Customer responsiveness,
2. Responsible banking,
3. Credit offtake,
4. PSBs as Udyami Mitra,
5. Deepening financial inclusion, and
6. Digitalisation and developing personnel.