Banking Regulation and Monetary Policy

Correct option is (4). NABARD was set up with an initial capital of 100 crore. Consequent to the revision in the composition of share capital between Government of India and RBI, the paid up capital as on 31 March 2015, stood at 5000 crore with Government of India holding 4,980 crore (99.60%) and Reserve Bank of India 20.00 crore (0.40%).

Correct Answer: increases. Repo rate is the rate at which the central bank of a country (Reserve Bank of India in case of India) lends money to commercial banks in the event of any shortfall of funds. Thus, the money supply will decrease with the bank which will mean that the rate of interest on loans offered by the bank will increase. 

Correct Answer: Reserve Bank of India. Banknotes in India are currently being issued in the denomination of ₹ 10, ₹ 20, ₹ 50, ₹ 100 ₹ 500, and ₹ 1000. These notes are called banknotes as they are issued by the Reserve Bank of India (Reserve Bank). 

The RBI draws its regulatory powers from BOTH the RBI Act (1934) and the Banking Regulation Act (1949). The RBI Act establishes the RBI and gives it some powers, while the Banking Regulation Act specifically empowers it to regulate the banking sector. Option D correctly identifies both acts as the source of RBI's authority.

The Reserve Bank of India (RBI) is India's central bank and primary regulator for banking sector liquidity. It formulates and enforces liquidity frameworks like CRR, SLR, LCR, and liquidity coverage ratios to ensure banks maintain adequate liquid assets. State and Central governments don't directly set banking liquidity rules - that's the central bank's mandate.

The Reserve Bank of India (RBI) is India's central bank responsible for monetary policy, not fiscal policy. Monetary policy deals with credit availability and money supply, while fiscal policy is the government's domain involving taxation and spending.

Statutory liquidity ratio (SLR) is a term for reserve requirement that the commercial banks in India require to maintain in the form of gold and/or government approved securities before providing credit to the customers.

These are long term bonds issued by the post office where the capital is doubled in 5.5 years.

Cash Reserve Ratio (CRR) is the mandatory fraction of deposits that commercial banks must maintain with the Central Bank (RBI in India) in cash form. It's a monetary policy tool used to control money supply and lending capacity.

Regional Rural Banks were specifically established to provide banking services to rural areas, with priority given to small and marginal farmers, agricultural labourers, and artisans. This is their core mandated objective.

NABARD (National Bank for Agriculture and Rural Development) is India's apex development bank for rural sectors. While called a 'bank', it's primarily a development finance institution - but 'bank' (A) remains the most accurate among options.

The Tarapore Committee (II) was constituted to recommend measures for fuller capital account convertibility in India, building on earlier work toward financial liberalization and gradual opening of the capital account.

The SBI (Amendment) Bill 2010 proposed reducing the government's shareholding in State Bank of India from 55% to 51%, the minimum required to maintain majority control, allowing more public floating shares.

The RBI acts as lender of last resort for banks facing liquidity crises, providing emergency funds when banks cannot borrow elsewhere. Option A is incorrect because balance of payments is a broader concept than balance of trade (which only covers goods). Option B is factually incorrect as India maintains substantial foreign exchange reserves. Option C is wrong because devaluation is not a cure-all for balance of payments problems.

In India, open market operations are primarily used to manage government borrowing requirements and control liquidity in the banking system. When RBI buys or sells government securities, it helps the government borrow from the market smoothly. While OMO can indirectly affect credit expansion and inflation, its primary purpose in the Indian context has been facilitating government borrowing and liquidity management.