Quick recall · 197 cards
Short MCQ-style retrieval prompts. Tap a card to reveal the answer.
PYQ
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The chairman of the Central Board of RBI is
A · Governor
PYQ
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Which of the following is true about the functions performed by RBI? (i) It is the Bank of Issue (ii) It acts as banker to the Government (iii) It is the banker of other banks (iv) It regulates the flow of credit
C · All the Above
PYQ
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To control inflation and tackle the problem of exchange liquidity due to foreign exchange inflows, the RBI
A · Sells government securities
PYQ · 2023
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RBI regulates which type of financial institutions?
A · All banks
RBI regulates all banks including commercial, cooperative, regional rural, and payment banks as part of its supervisory functions to ensure stability in the banking system.
PYQ
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The preamble of the RBI does not include which of the following basic functions of the bank?
C · To operate the currency and financial market system of the country to its advantage
PYQ
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In which year was the Reserve Bank of India established?
A · 1935
The Reserve Bank of India was established on April 1, 1935, under the Reserve Bank of India Act, 1934, following recommendations of the Hilton Young Commission.
PYQ
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Which of the following is/are functions of the RBI? I. Acts as the currency authority II. Controls money supply and credit III. Manages foreign exchange IV. Serves as a banker to the government
D · All the above
All listed functions are core to RBI: currency issuance, monetary control, forex management, and government banking, as outlined in its statutory roles.
PYQ
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Controlling the money supply to achieve desired macroeconomic goals is called
A · a. monetary policy
PYQ
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The Federal Reserve's monetary policy tool is
D · d. all of the above
PYQ
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To decrease the (growth of the) money supply, which of the following should the Fed do?
A · a. Sell bonds on the open market
PYQ
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The Federal Reserve is considered a powerful institution because it has the power to:
C · c. Buy government bonds, act as a lender of last resort, and create money
PYQ · 2011
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Reverse Repo is a tool used by RBI to
B · Absorb liquidity from the system
PYQ · 2024
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Which of the following is a type of commercial bank?
B · Public Sector Banks
PYQ · 2024
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What is the oldest bank in India?
C · Bank of Hindustan
The oldest bank in India is The Madras Bank (1683), followed by Bank of Bombay (1720), then Bank of Hindustan (1770). Bank of Hindustan is the correct answer among the options provided.[1]
PYQ · 2024
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Which of the following is an example of a development bank in India?
C · Industrial Finance Corporation of India (IFCI)
PYQ · 2024
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State Bank of India belongs to which category of banks?
C · Commercial Bank
PYQ · 2024
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Bank of Baroda is an example of which type of bank?
C · Public Sector Bank
Bank of Baroda is a public sector bank owned by the Government of India. Private sector banks include Axis Bank, ICICI Bank, HDFC Bank. All banks in India are regulated by RBI.[2]
PYQ
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Bank having maximum number of branches in India?
B · State Bank of India
State Bank of India has the maximum number of branches in India among all banks.[6]
PYQ · 2026
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The nationalization of 14 major commercial banks by the Government of India occurred in which year?
C · 1969
PYQ · 2020
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Second Phase of Nationalisation was conducted in which year?
B · 1980
PYQ
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In which year was the Reserve Bank of India nationalised?
C · 1949
PYQ · 2020
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Which was the only public sector undertaking to be Nationalised in 1955?
D · State Bank of India
PYQ
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In which of the following years, the Basel - I accord was introduced?
A · 1988
PYQ
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Basel III Norms eliminated the disadvantages of which previous Basel accords?
C · Basel I and Basel II
PYQ
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Basel III capital regulations were released by Basel Committee on Banking Supervision (BCBS) as a Global Regulatory Framework for more resilient banks and banking systems on _______.
A · December 2010
PYQ
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The maximum aggregate limit for PSL in Agri Infrastructure/Agro-Processing is:
B · Rs 100 crore
PYQ · 2025
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As per RBI's revised PSL Master Directions (2025), what is the overall PSL target for Scheduled Commercial Banks (SCBs)?
B · 40% of ANBC
PYQ · 2026
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Which institution has the highest Priority Sector Lending norm in India as of 2026?
A · Small Finance Banks
PYQ · 2025
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Under the revised guidelines, the PSL target for Small Finance Banks (SFBs) has been reduced from 75% to what percentage?
B · 60%
PYQ
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Which among the following is not under the priority sector lending scheme of RBI?
D · Real Estate
PYQ · 2023
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Who is the current Chairman of NABARD as of 2023?
B · B) Ghanshyam Mishra
Ghanshyam Mishra is the Chairman of NABARD since August 2023. He succeeded B P Kanungo. NABARD is governed by a 15-member board headed by the Chairman appointed by the Government of India.[1]
PYQ · 2022
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What is the full form of NABARD?
A · A) National Bank for Agriculture and Rural Development
NABARD stands for National Bank for Agriculture and Rural Development. It is the apex development bank in India for agriculture and rural sector, established on 12 July 1982.[1]
PYQ · 2024
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When was NABARD established?
B · B) 1982
NABARD was established on 12 July 1982 by an Act of Parliament to implement the National Bank for Agriculture and Rural Development Act 1981.[1]
PYQ · 2023
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Which of the following is the primary function of NABARD?
B · B) Provide refinance to agriculture and rural sectors
NABARD's primary function is to provide refinance facilities to banks and financial institutions for agriculture, small-scale industries, and rural development activities.[1]
Question bank
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Who is the head of the Reserve Bank of India (RBI)?
A · Governor
The Governor is the chief executive officer and head of the Reserve Bank of India.
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Which of the following bodies is responsible for the general superintendence and direction of the affairs of the RBI?
B · Central Board of Directors
The Central Board of Directors is responsible for the general superintendence and direction of the RBI's affairs.
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How many Deputy Governors does the RBI typically have at a time?
C · Three
The RBI usually has three Deputy Governors appointed by the Central Government.
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Which of the following best describes the hierarchical structure of the Reserve Bank of India?
A · Governor > Deputy Governors > Executive Directors > Regional Directors
The RBI hierarchy is headed by the Governor, followed by Deputy Governors, Executive Directors, and Regional Directors.
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Which of the following is NOT a primary function of the RBI?
C · Providing loans to the public
The RBI does not provide loans directly to the public; it regulates banks and financial institutions that do so.
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Which function of the RBI involves controlling the supply of money in the economy?
A · Monetary Authority
As the Monetary Authority, the RBI controls the money supply to maintain price stability and economic growth.
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Which of the following RBI functions relates to managing the country’s foreign exchange reserves?
C · Management of Foreign Exchange
The RBI manages foreign exchange reserves to stabilize the currency and maintain external stability.
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Which of the following is a key function of the RBI as a banker to the government?
B · Managing the government’s accounts and public debt
The RBI manages the government’s accounts and public debt as its banker.
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Which of the following is NOT a function of the RBI’s monetary policy?
D · Setting fiscal policy
Fiscal policy is set by the government, not by the RBI’s monetary policy.
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Which of the following is a monetary policy tool used by the RBI to control liquidity in the banking system?
A · Cash Reserve Ratio (CRR)
CRR is a monetary policy tool that requires banks to keep a certain percentage of their deposits with the RBI, controlling liquidity.
Question bank
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What happens when the RBI increases the repo rate?
B · Banks borrow less from RBI, reducing liquidity
An increase in repo rate makes borrowing costlier for banks, reducing liquidity in the economy.
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Which of the following is a HARD-level question on monetary policy control measures?
A · How does the RBI use Open Market Operations (OMO) to control inflation?
Open Market Operations involve buying and selling government securities to regulate money supply and inflation, requiring analytical understanding.
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Which of the following is a HARD-level question related to monetary policy and control measures?
A · Explain the impact of increasing the Statutory Liquidity Ratio (SLR) on bank credit.
Increasing SLR forces banks to keep more funds in government securities, reducing funds available for lending, thus controlling credit expansion.
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Which of the following is a function of the RBI as a banker to other banks?
B · Maintaining cash reserves of banks
The RBI maintains the cash reserves of banks and acts as a lender of last resort.
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Which of the following is a function of the RBI as banker to the government?
B · Managing public debt
The RBI manages the government’s public debt and facilitates borrowing.
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Which of the following best describes the RBI’s role as a banker to banks?
B · It maintains cash reserves and provides liquidity support to banks
The RBI acts as a banker to banks by maintaining their reserves and providing liquidity support when needed.
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Which of the following is a regulatory role of the RBI?
C · Licensing banks and regulating their operations
The RBI regulates and supervises banks by granting licenses and monitoring their functioning.
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Which of the following is a medium-level regulatory function of the RBI?
A · Setting the Cash Reserve Ratio (CRR)
Setting CRR is a regulatory tool used by the RBI to control liquidity and credit in the banking system.
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Which of the following is a medium-level supervisory role of the RBI?
A · Inspecting banks to ensure compliance with norms
The RBI supervises banks through inspections to ensure they comply with regulatory norms.
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Which of the following is a HARD-level question on the RBI’s regulatory and supervisory role?
A · How does the RBI use the Prompt Corrective Action (PCA) framework to regulate banks?
The PCA framework is a regulatory tool used by the RBI to monitor and take corrective actions against weak banks, requiring analytical understanding.
Question bank
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Which of the following is the sole authority for issuing currency notes in India?
C · Reserve Bank of India
The Reserve Bank of India is the sole issuer of currency notes in India except for one rupee notes issued by the Government.
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Which of the following is a medium-level question on currency issuance and management by RBI?
A · What measures does the RBI take to prevent counterfeit currency?
The RBI uses various security features and public awareness to prevent counterfeit currency, requiring understanding of currency management.
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Who appoints the Governor of the Reserve Bank of India (RBI)?
D · The Government of India
The Governor of RBI is appointed by the Government of India, usually by the central government through the Ministry of Finance.
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Which of the following is NOT a part of the RBI's Central Board of Directors?
D · State Bank of India Nominees
The Central Board of RBI consists of Official Directors, Non-official Directors, and Government Nominees, but there is no specific representation from the State Bank of India.
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What is the primary role of the Deputy Governors in the RBI's organizational hierarchy?
B · To assist the Governor in policy formulation and implementation
Deputy Governors assist the Governor in the formulation and implementation of monetary and regulatory policies and oversee various departments within RBI.
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Which committee within the RBI is primarily responsible for monetary policy decisions?
B · Monetary Policy Committee
The Monetary Policy Committee (MPC) is responsible for deciding the policy interest rates and other monetary policy measures.
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Which of the following is a primary function of the Reserve Bank of India?
A · Issuing currency notes
One of the core functions of RBI is to issue currency notes and regulate the supply of money in the economy.
Question bank
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Which function of RBI involves acting as a banker to the government?
C · Managing government accounts and public debt
RBI acts as a banker to the government by managing its accounts, public debt, and facilitating government transactions.
Question bank
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Which of the following is NOT a function of the RBI?
C · Determining fiscal policy
Fiscal policy is determined by the government, not the RBI. RBI is responsible for monetary policy and regulation.
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Which function of RBI helps in controlling inflation in the economy?
B · Monetary policy implementation
By implementing monetary policy, RBI controls inflation through interest rates and money supply management.
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Which of the following is a quantitative monetary policy instrument used by RBI?
A · Cash Reserve Ratio (CRR)
CRR is a quantitative instrument that mandates banks to keep a certain percentage of deposits with RBI, affecting liquidity.
Question bank
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Which monetary policy tool involves RBI buying or selling government securities to regulate money supply?
A · Open Market Operations
Open Market Operations involve RBI buying or selling government securities to influence liquidity and money supply.
Question bank
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If RBI wants to increase liquidity in the banking system, which of the following actions would it take?
C · Purchase government securities in the open market
Purchasing government securities injects money into the banking system, increasing liquidity.
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Which of the following is a qualitative monetary policy instrument used by RBI?
B · Selective credit control
Selective credit control is a qualitative instrument used to regulate credit flow to specific sectors.
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Which of the following roles does RBI perform as a regulator and supervisor of banks?
C · Ensuring financial stability and soundness of banks
RBI regulates and supervises banks to maintain financial stability and protect depositors' interests.
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Which of the following committees was set up by RBI to strengthen the supervision of banks?
C · Board for Financial Supervision
The Board for Financial Supervision was established by RBI to enhance the supervisory framework for banks and financial institutions.
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Which regulatory measure requires banks to maintain a minimum percentage of their net demand and time liabilities as liquid assets?
B · Statutory Liquidity Ratio (SLR)
SLR mandates banks to keep a certain percentage of their net demand and time liabilities in liquid assets like cash, gold, or government securities.
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How does RBI maintain its autonomy while working closely with the Government of India?
C · By having an independent Monetary Policy Committee
The establishment of an independent Monetary Policy Committee helps RBI maintain autonomy in monetary policy decisions while coordinating with the government.
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Which of the following best describes the relationship between RBI and the Government of India regarding currency issuance?
C · RBI issues currency on behalf of the government and manages currency circulation
RBI is the sole issuer of currency in India and manages currency circulation on behalf of the government.
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Which recent amendment has enhanced the transparency and accountability of the RBI's monetary policy decisions?
A · Establishment of the Monetary Policy Committee (MPC)
The formation of the Monetary Policy Committee (MPC) in 2016 was a significant amendment to improve transparency and accountability in monetary policy.
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Which of the following changes was introduced in RBI's organizational structure to strengthen financial stability?
A · Creation of the Financial Stability Unit
The Financial Stability Unit was created to monitor and analyze risks to the financial system and enhance stability.
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What is the primary objective of monetary policy in India?
A · To control inflation and stabilize currency
The primary objective of monetary policy is to control inflation and stabilize the currency to ensure economic stability.
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Monetary policy can be defined as the process by which the central bank controls the supply of money in the economy to achieve specific objectives. Which of the following is NOT an objective of monetary policy?
C · Promoting exports
Promoting exports is generally a function of trade policy, not monetary policy.
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Which of the following best describes the objective of monetary policy in the context of economic growth?
B · To maintain price stability while supporting growth
Monetary policy aims to maintain price stability while supporting sustainable economic growth.
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Which of the following is a quantitative instrument of monetary policy used by the RBI?
A · Cash Reserve Ratio (CRR)
CRR is a quantitative instrument that controls the amount of funds banks can lend.
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Which instrument of monetary policy involves the RBI buying or selling government securities to regulate liquidity?
A · Open Market Operations
Open Market Operations involve buying or selling government securities to influence money supply.
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Which of the following is NOT a direct instrument of monetary policy?
B · Open Market Operations
Open Market Operations are indirect instruments, while the others are direct instruments.
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If the RBI wants to reduce inflationary pressure, which of the following actions would it most likely take?
A · Increase Cash Reserve Ratio
Increasing CRR reduces the funds available for banks to lend, thus controlling inflation.
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Which type of monetary policy is adopted to curb inflation by reducing money supply?
B · Contractionary Monetary Policy
Contractionary monetary policy reduces money supply to control inflation.
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Which of the following is a characteristic of expansionary monetary policy?
C · Encouragement of borrowing and investment
Expansionary policy encourages borrowing and investment by increasing money supply and lowering interest rates.
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Which type of monetary policy aims to maintain the status quo without stimulating or contracting the economy?
A · Neutral Monetary Policy
Neutral monetary policy neither stimulates nor contracts the economy, maintaining equilibrium.
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Which of the following is a key role of the Reserve Bank of India in monetary policy formulation?
B · Regulating the money supply
RBI regulates the money supply to achieve monetary policy objectives.
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Which of the following tools does RBI use to control inflation through monetary policy?
A · Adjusting Repo Rate
Adjusting the repo rate influences borrowing costs and liquidity, helping control inflation.
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Which of the following statements about the RBI's role in monetary policy is correct?
B · RBI formulates and implements monetary policy independently
RBI formulates and implements monetary policy independently to regulate money supply and inflation.
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In which scenario would the RBI most likely decrease the bank rate as part of its monetary policy?
B · To encourage economic growth during a slowdown
Decreasing the bank rate lowers borrowing costs, encouraging investment and growth during economic slowdowns.
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How does monetary policy help in controlling inflation?
B · By restricting credit and increasing interest rates
Restricting credit and raising interest rates reduce spending and demand, controlling inflation.
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Which of the following is an effect of tight monetary policy on inflation?
B · Decrease in inflation
Tight monetary policy reduces money supply and demand, leading to a decrease in inflation.
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Which of the following monetary policy actions is most likely to promote economic growth?
B · Lowering interest rates
Lowering interest rates reduces borrowing costs, encouraging investment and economic growth.
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Which of the following best describes the trade-off faced by monetary policy between inflation and economic growth?
B · Controlling inflation may slow down economic growth
Tight monetary policy to control inflation may reduce liquidity and slow economic growth.
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Which of the following monetary policy measures can have a delayed effect on economic growth due to the transmission mechanism?
B · Adjustment of Repo Rate by RBI
Changes in repo rate affect interest rates and credit availability, influencing growth with a time lag through the transmission mechanism.
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Which of the following best describes the monetary policy transmission mechanism?
A · The process by which monetary policy decisions affect the economy
The transmission mechanism explains how monetary policy actions influence variables like inflation, output, and employment.
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Which of the following is a channel through which monetary policy transmits its effects to the real economy?
A · Interest rate channel
The interest rate channel affects borrowing costs, influencing consumption and investment decisions.
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Which of the following challenges has recently affected the effectiveness of Indian monetary policy?
A · High fiscal deficit and inflationary pressures
High fiscal deficits and inflationary pressures limit RBI's ability to control inflation effectively.
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Which recent trend has the RBI adopted to improve monetary policy effectiveness?
A · Adoption of flexible inflation targeting
RBI adopted flexible inflation targeting to better anchor inflation expectations and improve policy credibility.
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Which of the following is a major challenge faced by Indian monetary policy in recent years?
A · Managing liquidity amid volatile capital flows
Volatile capital flows create liquidity management challenges for RBI in implementing monetary policy.
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Which of the following best defines monetary policy?
B · Control of money supply and interest rates to achieve economic objectives
Monetary policy involves controlling the money supply and interest rates to achieve objectives like price stability and economic growth.
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One of the primary objectives of monetary policy is to:
B · Control inflation and stabilize the currency
Controlling inflation and stabilizing the currency are key objectives of monetary policy.
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Which of the following is NOT an objective of monetary policy in India?
C · Fiscal deficit reduction
Fiscal deficit reduction is a fiscal policy objective, not a direct objective of monetary policy.
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An expansionary monetary policy is typically used to:
B · Encourage economic growth by increasing money supply
Expansionary monetary policy increases money supply to stimulate economic growth.
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Which type of monetary policy is adopted to curb inflation?
B · Contractionary policy
Contractionary policy reduces money supply to control inflation.
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Which of the following best describes a neutral monetary policy?
C · Policy that neither stimulates nor restricts economic growth
Neutral monetary policy maintains the status quo without stimulating or restricting growth.
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Which of the following is an example of a contractionary monetary policy action?
B · Increasing the cash reserve ratio (CRR)
Increasing CRR reduces the funds banks can lend, tightening money supply, a contractionary measure.
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Which of the following scenarios best illustrates the use of expansionary monetary policy?
B · RBI decreases the cash reserve ratio to encourage lending
Decreasing CRR increases bank lending capacity, stimulating growth, an expansionary policy.
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Which of the following is a quantitative instrument of monetary policy?
B · Open market operations
Open market operations involve buying/selling government securities to regulate money supply, a quantitative tool.
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Which instrument of monetary policy involves the RBI influencing banks to restrict or encourage credit to certain sectors?
B · Selective credit control
Selective credit control is a qualitative instrument targeting credit flow to specific sectors.
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Which of the following is NOT a quantitative instrument of monetary policy?
C · Moral suasion
Moral suasion is a qualitative instrument involving persuasion rather than direct control.
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Which instrument of monetary policy directly affects the amount of funds banks must hold as reserves?
B · Cash Reserve Ratio (CRR)
CRR mandates the minimum reserves banks must hold, directly impacting liquidity.
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If the RBI wants to increase liquidity in the banking system, which of the following actions would it most likely take?
C · Buy government securities in open market operations
Buying government securities injects liquidity into the banking system.
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Which of the following is a key role of the Reserve Bank of India in monetary policy?
B · Formulating and implementing monetary policy
RBI is responsible for formulating and implementing monetary policy in India.
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Which of the following functions is NOT performed by the RBI in the context of monetary policy?
C · Setting direct tax rates
Setting direct tax rates is a fiscal policy function, not RBI's responsibility.
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Which of the following best describes the RBI's role in monetary policy implementation?
C · Both formulates and executes monetary policy measures
RBI is responsible for both formulation and execution of monetary policy.
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How does the RBI typically signal a change in monetary policy stance to the market?
B · By adjusting the repo rate
Adjusting the repo rate is a primary tool through which RBI signals monetary policy changes.
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The Monetary Policy Committee (MPC) in India primarily:
B · Decides the inflation target and policy rates
MPC decides the inflation target and sets key policy rates like the repo rate.
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How many members constitute the Monetary Policy Committee (MPC) of India?
B · 7
The MPC consists of 7 members: 3 from RBI, 3 appointed by the government, and the RBI Governor as chairperson.
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Which of the following is a primary function of the MPC?
B · Determining the policy repo rate to control inflation
MPC determines the policy repo rate to maintain inflation within target range.
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If the MPC decides to increase the policy repo rate, the likely immediate effect is:
B · Decrease in borrowing and liquidity
An increase in repo rate makes borrowing costlier, reducing liquidity and demand.
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Which of the following is a direct impact of monetary policy tightening?
C · Reduced credit availability
Tightening monetary policy reduces credit availability to control inflation.
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How does a contractionary monetary policy affect employment in the short term?
C · May reduce employment due to lower economic activity
Contractionary policy may reduce economic activity, potentially lowering employment in the short term.
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Which of the following best describes the relationship between monetary policy and inflation?
B · Contractionary policy is used to control inflation
Contractionary monetary policy reduces money supply to control inflation.
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Which recent challenge has significantly influenced the formulation of monetary policy in India?
B · Global economic uncertainties and pandemic effects
Global uncertainties and COVID-19 pandemic have posed challenges for monetary policy formulation.
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Which of the following is a recent trend in Indian monetary policy?
B · Adoption of flexible inflation targeting
India has adopted flexible inflation targeting as a key monetary policy framework.
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One of the major challenges faced by the RBI in recent monetary policy formulation is:
A · Managing inflation amid supply chain disruptions
Supply chain disruptions have complicated inflation management in recent times.
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Which of the following best explains why RBI may prefer using OMO purchases instead of reducing the Repo rate to inject liquidity during a period of moderate inflation and slow growth?
A · OMO purchases inject liquidity without altering the policy rate, avoiding signaling a change in monetary stance.
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What is the primary purpose of the Cash Reserve Ratio (CRR) maintained by banks with the Reserve Bank of India?
A · To ensure banks have sufficient liquidity to meet depositor demands
CRR is the percentage of a bank's total deposits that must be kept with the RBI as liquid cash to ensure liquidity and financial stability.
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If the RBI increases the Cash Reserve Ratio, what is the most likely immediate effect on the banking system?
B · Banks will have less funds available for lending
An increase in CRR means banks have to keep a higher portion of deposits with RBI, reducing the funds available for lending.
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Which of the following is NOT true about the Cash Reserve Ratio (CRR)?
B · Banks earn interest on the CRR amount kept with RBI
Banks do not earn any interest on the CRR amount maintained with the RBI.
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The Cash Reserve Ratio (CRR) is mandated under which of the following acts or regulations?
B · Reserve Bank of India Act, 1934
CRR is mandated under the Reserve Bank of India Act, 1934 as a monetary policy tool.
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If a bank has total net demand and time liabilities of ₹1000 crore and the CRR is 4%, how much amount must the bank keep with the RBI as CRR?
A · ₹40 crore
CRR amount = 4% of ₹1000 crore = ₹40 crore.
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How does an increase in CRR affect inflation and liquidity in the economy?
A · It reduces liquidity and helps control inflation
Increasing CRR reduces the funds banks can lend, lowering liquidity and helping control inflation.
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Which of the following statements best describes the relationship between CRR and monetary policy?
B · CRR is a monetary policy tool used by RBI to regulate money supply
CRR is a monetary policy instrument used by RBI to control money supply and liquidity.
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Consider a scenario where RBI reduces the CRR. What is the most likely impact on the banking system and economy?
B · Banks will have more money to lend, potentially boosting economic growth
A reduction in CRR frees up funds for banks to lend more, which can stimulate economic growth.
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Which of the following is a key difference between Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR)?
A · CRR is maintained in cash with RBI; SLR is maintained in liquid assets including government securities
CRR is the cash amount banks must keep with RBI, whereas SLR is the percentage of deposits banks must maintain in liquid assets like government securities.
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The Statutory Liquidity Ratio (SLR) is primarily maintained by banks to ensure:
A · Liquidity and solvency by holding safe and liquid assets
SLR ensures banks maintain a certain percentage of deposits in liquid and safe assets to meet obligations and maintain solvency.
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Which of the following assets can be included by banks to maintain the Statutory Liquidity Ratio (SLR)?
C · Government securities, cash, and approved securities
SLR includes cash, gold, government securities, and other approved securities as per RBI guidelines.
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If a bank’s net demand and time liabilities are ₹500 crore and the SLR is 18%, what is the minimum amount the bank must maintain in liquid assets?
B · ₹90 crore
SLR amount = 18% of ₹500 crore = ₹90 crore. (Corrected: 18% of 500 crore = 90 crore)
Question bank
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Which of the following is a consequence if a bank fails to maintain the required SLR?
A · The bank will be penalized by the RBI
Banks failing to maintain SLR are liable to penalties imposed by the RBI.
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Why is SLR considered a tool for controlling credit expansion in the economy?
B · Because it forces banks to invest a portion of deposits in safe assets, reducing funds for lending
By mandating banks to hold a portion of deposits in liquid assets, SLR reduces the funds available for lending, thus controlling credit expansion.
Question bank
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Which of the following statements is true about the difference between CRR and SLR?
C · CRR is maintained in cash with RBI, SLR includes government securities and other liquid assets
CRR is cash kept with RBI, while SLR includes government securities and other liquid assets held by banks themselves.
Question bank
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Which of the following best explains why RBI uses SLR as a monetary policy tool?
A · To control inflation by regulating the amount banks can lend
By adjusting SLR, RBI controls the amount banks can lend, thereby influencing liquidity and inflation.
Question bank
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When RBI conducts a repo operation, it:
A · Buys government securities from banks with an agreement to sell them back later
In a repo operation, RBI buys securities from banks with an agreement to sell them back, injecting liquidity temporarily.
Question bank
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The repo rate is best described as:
B · The rate at which RBI lends money to commercial banks against securities
Repo rate is the interest rate at which RBI lends money to banks against government securities.
Question bank
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Which of the following is a direct effect of an increase in the repo rate by RBI?
B · Banks will borrow less from RBI, increasing lending rates
An increase in repo rate makes borrowing from RBI costlier, leading banks to borrow less and increase lending rates.
Question bank
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In a repo transaction, the bank:
A · Sells securities to RBI and agrees to repurchase them later
In a repo, the bank sells securities to RBI with an agreement to buy them back later at a predetermined price.
Question bank
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Which of the following statements about repo operations is correct?
B · Repo operations are used by RBI to inject liquidity into the banking system
Repo operations are used by RBI to inject liquidity into the banking system by lending funds to banks.
Question bank
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If the RBI wants to reduce inflationary pressure, it is likely to:
A · Increase the repo rate to reduce liquidity
Increasing the repo rate makes borrowing costlier, reducing liquidity and helping control inflation.
Question bank
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Reverse repo operation refers to:
A · RBI borrowing money from banks by selling securities with an agreement to repurchase
In reverse repo, RBI borrows funds from banks by selling securities with an agreement to buy them back later.
Question bank
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The reverse repo rate is:
B · The rate at which RBI borrows from banks
Reverse repo rate is the interest rate at which RBI borrows money from banks.
Question bank
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Which of the following is a likely effect of an increase in the reverse repo rate by RBI?
B · Banks will park more funds with RBI to earn higher interest
Higher reverse repo rate incentivizes banks to park funds with RBI, absorbing liquidity from the market.
Question bank
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Which of the following best describes the purpose of reverse repo operations?
B · To absorb excess liquidity from the banking system
Reverse repo operations are used by RBI to absorb excess liquidity from banks temporarily.
Question bank
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If the RBI wants to encourage banks to lend more to the economy, it is likely to:
B · Decrease the reverse repo rate
Decreasing the reverse repo rate discourages banks from parking funds with RBI, encouraging more lending.
Question bank
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Which of the following statements correctly distinguishes between repo and reverse repo operations?
B · Repo is when RBI lends to banks; reverse repo is when RBI borrows from banks
In repo, RBI lends to banks; in reverse repo, RBI borrows from banks.
Question bank
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Which of the following is true about the impact of repo and reverse repo rates on liquidity?
D · Both higher repo and reverse repo rates decrease liquidity
Higher repo rate makes borrowing costlier, reducing liquidity; higher reverse repo rate attracts funds from banks, reducing liquidity.
Question bank
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Which of the following best explains why RBI uses repo and reverse repo operations as monetary tools?
B · To manage short-term liquidity in the banking system
Repo and reverse repo operations help RBI manage short-term liquidity and influence money supply.
Question bank
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Which of the following is NOT a characteristic of Statutory Liquidity Ratio (SLR)?
B · It is maintained with the Reserve Bank of India
SLR is maintained by banks themselves in specified assets, not with the RBI.
Question bank
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Which of the following statements about the Cash Reserve Ratio (CRR) is correct?
C · CRR is a percentage of net demand and time liabilities banks must keep with RBI in cash
CRR is a mandatory percentage of net demand and time liabilities banks must keep with RBI in cash form without earning interest.
Question bank
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Which of the following is an effect of a decrease in the Statutory Liquidity Ratio (SLR)?
B · Banks will have more funds available for lending, increasing credit flow
A decrease in SLR frees up funds for banks to lend more, increasing credit flow in the economy.
Question bank
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Which of the following best describes the relationship between repo rate and reverse repo rate?
C · Repo rate is generally higher than reverse repo rate
Typically, the repo rate is higher than the reverse repo rate to maintain a corridor for liquidity management.
Question bank
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Which of the following is NOT a function of the Cash Reserve Ratio (CRR)?
B · To provide funds for government expenditure
CRR is not used to provide funds for government expenditure; it is a monetary policy tool to control liquidity.
Question bank
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Which of the following is true about the impact of reverse repo operations on money supply?
B · Reverse repo operations decrease money supply by absorbing liquidity
Reverse repo operations absorb liquidity from the banking system, thus decreasing money supply.
Question bank
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Which of the following best explains why the RBI changes the CRR and SLR periodically?
A · To adjust liquidity and credit flow according to economic conditions
RBI adjusts CRR and SLR to regulate liquidity and credit flow to maintain economic stability.
Question bank
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Which of the following is true regarding the operational difference between repo and reverse repo?
B · In repo, RBI lends funds; in reverse repo, RBI borrows funds
Repo involves RBI lending money to banks; reverse repo involves RBI borrowing money from banks.
Question bank
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What is the primary purpose of the Cash Reserve Ratio (CRR) maintained by banks with the Reserve Bank of India?
C · To regulate inflation by controlling money supply
CRR is the percentage of a bank's total deposits that must be kept with the RBI in cash form. It is used as a tool to control money supply and inflation.
Question bank
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If a bank has total deposits of ₹100 crore and the CRR is set at 4%, how much amount must the bank keep as cash reserve with the RBI?
B · ₹4 crore
CRR amount = 4% of ₹100 crore = ₹4 crore.
Question bank
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Which of the following statements about CRR is NOT true?
A · Banks earn interest on the CRR amount kept with RBI
Banks do not earn any interest on the CRR amount kept with the RBI; it is a non-interest-bearing reserve.
Question bank
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How does an increase in CRR by the RBI affect the liquidity position of banks?
B · Decreases liquidity as banks have to keep more funds idle with RBI
An increase in CRR means banks must keep a higher portion of deposits with RBI, reducing funds available for lending and thus decreasing liquidity.
Question bank
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If the RBI wants to control inflation by reducing money supply, which of the following actions related to CRR is most appropriate?
B · Increase CRR to reduce bank lending
Increasing CRR reduces the funds banks can lend, thereby reducing money supply and controlling inflation.
Question bank
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A bank has total deposits of ₹500 crore and the CRR is 3.5%. If the bank maintains ₹18 crore as cash reserve with RBI, what can be inferred?
B · Bank is maintaining more than required CRR
Required CRR = 3.5% of ₹500 crore = ₹17.5 crore. The bank maintains ₹18 crore, which is more than required.
Question bank
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Which of the following is a consequence if banks fail to maintain the prescribed CRR with RBI?
B · They have to pay penalty and may face restrictions on lending
Banks failing to maintain CRR face penalties and restrictions, as CRR is mandatory for monetary stability.
Question bank
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If the RBI increases CRR by 1%, what immediate effect does it have on the bank's ability to create credit?
B · Credit creation decreases as banks have less funds to lend
An increase in CRR reduces the funds available with banks for lending, thus decreasing credit creation.
Question bank
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The Statutory Liquidity Ratio (SLR) requires banks to maintain a certain percentage of their net demand and time liabilities in which form?
B · Cash, gold, and approved securities
SLR mandates banks to maintain a specified percentage of their net demand and time liabilities in cash, gold, or approved securities.
Question bank
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Which of the following is NOT a purpose of maintaining the SLR by banks?
D · Increasing bank profits through investments
SLR is primarily for liquidity, credit control, and government borrowing, not for increasing bank profits.
Question bank
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If a bank has net demand and time liabilities of ₹200 crore and the SLR is 18%, how much must the bank invest in approved securities or maintain as liquid assets?
A · ₹36 crore
SLR amount = 18% of ₹200 crore = ₹36 crore.
Question bank
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Which of the following assets is NOT counted towards SLR maintenance by banks?
D · Corporate bonds
Corporate bonds are not approved securities for SLR; only cash, gold, and government securities qualify.
Question bank
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How does an increase in the SLR affect the credit creation capacity of banks?
B · Decreases credit creation as more funds are locked in liquid assets
Higher SLR means banks must keep more funds in liquid assets, reducing funds available for lending and credit creation.
Question bank
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Which of the following is a regulatory reason for RBI to adjust the SLR?
A · To control inflation by restricting bank credit
RBI adjusts SLR to control inflation by influencing the amount of credit banks can create.
Question bank
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A bank has net demand and time liabilities of ₹400 crore. If the SLR is 20%, but the bank has invested only ₹70 crore in approved securities, what is the status of SLR maintenance?
B · Bank is maintaining less than required SLR
Required SLR = 20% of ₹400 crore = ₹80 crore. The bank has invested ₹70 crore, which is less than required.
Question bank
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Which of the following statements about SLR is true?
C · SLR helps in ensuring bank solvency and liquidity
SLR ensures banks maintain adequate liquid assets to meet liabilities and remain solvent.
Question bank
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If the RBI wants to increase liquidity in the banking system, which of the following actions related to SLR is most effective?
B · Decrease SLR to free up funds for lending
Decreasing SLR allows banks to hold fewer liquid assets and lend more, increasing liquidity.
Question bank
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The Repo Rate is best described as the rate at which:
B · The RBI lends money to commercial banks against government securities
Repo rate is the rate at which RBI lends short-term funds to banks against government securities.
Question bank
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Which of the following is a direct effect of an increase in the repo rate by the RBI?
B · Increase in borrowing cost for banks
An increase in repo rate raises the cost of borrowing for banks, which may increase lending rates.
Question bank
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If the RBI wants to reduce inflationary pressure in the economy, it is most likely to:
A · Increase the repo rate to make borrowing costlier
Increasing repo rate makes borrowing costlier, reducing spending and inflation.
Question bank
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A bank borrows ₹10 crore from RBI at a repo rate of 6% for 90 days. What is the interest amount payable by the bank?
A · ₹15 lakh
Interest = Principal × Rate × Time = 10 crore × 6% × (90/365) = ₹14.79 lakh ≈ ₹15 lakh.
Question bank
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Which of the following best explains the relationship between repo rate and inflation?
B · Higher repo rate generally leads to lower inflation
Higher repo rate increases borrowing cost, reducing spending and inflation.
Question bank
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If the RBI decreases the repo rate, which of the following is a likely consequence?
B · Banks find it cheaper to borrow from RBI and may lower lending rates
Lower repo rate reduces borrowing cost for banks, encouraging more lending at lower rates.
Question bank
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Which of the following statements about reverse repo rate is correct?
A · It is the rate at which RBI borrows money from commercial banks
Reverse repo rate is the rate at which RBI borrows money from commercial banks.
Question bank
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When the RBI wants to absorb excess liquidity from the banking system, it is likely to:
A · Increase the reverse repo rate to encourage banks to park funds with RBI
Increasing reverse repo rate incentivizes banks to deposit excess funds with RBI, absorbing liquidity.
Question bank
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If the reverse repo rate is 4% and the repo rate is 6%, what does this imply about the monetary policy stance?
B · The RBI is encouraging banks to park funds with it
A lower reverse repo rate compared to repo rate encourages banks to park funds with RBI to earn interest.
Question bank
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Which of the following scenarios best describes the use of reverse repo operations by RBI?
B · RBI borrows money from banks to reduce excess liquidity
Reverse repo operations involve RBI borrowing money from banks to absorb excess liquidity.
Question bank
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If the RBI increases the reverse repo rate, what is the expected impact on bank behavior?
B · Banks will park more funds with RBI to earn higher interest
Higher reverse repo rate makes it attractive for banks to deposit funds with RBI, reducing liquidity in the market.
Question bank
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A bank deposits ₹50 crore with RBI under reverse repo at a rate of 5% for 180 days. What is the interest earned by the bank?
A · ₹1.25 crore
Question bank
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Which of the following pairs correctly matches the rate with its function?
C · Repo Rate - Rate at which RBI lends to banks
Repo rate is the rate at which RBI lends to banks; reverse repo rate is the rate at which RBI borrows from banks.
Question bank
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If the RBI wants to tighten monetary policy, which of the following combinations is most likely?
C · Increase both repo and reverse repo rates
Increasing both rates makes borrowing costlier and encourages banks to park funds with RBI, tightening liquidity.
Question bank
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Which of the following is true regarding the relationship between repo rate and reverse repo rate?
B · Reverse repo rate is always lower than repo rate
Reverse repo rate is generally lower than repo rate to maintain a corridor for monetary policy operations.
