Tag: instruments of monetary policy and the reserve bank of india

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Questions Related to instruments of monetary policy and the reserve bank of india

Multiple choice instruments of monetary policy and the reserve bank of india money and banking economics

Bank rate is _______.

  1. the interest rate at which a central bank provides loans to other banks.

  2. the rate at which the bank discounts the bills and other instruments of other commercial banks.

  3. (A and (B)

  4. none of above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Bank rate is the rate at which the central bank is ready to buy or rediscount bills of exchange or other commercial papers. It serves as the standard rate for lending to commercial banks.

Multiple choice instruments of monetary policy and the reserve bank of india money and banking economics

In the Monetary Policy announced for the year 2006-07 the following announcements have been made- Bank Rate, Repo Rate, Reverse Repo Rate and Cash Reserve Ratio have been kept unchanged at their present levels of 6 per cent, 6.5 per cent, 5.5 per cent and 5 per cent respectively. These have been kept unchanged as liquidity pressure seen during the last 4 months of 2005-06 have eased off considerably. In the given paragraph it is stated that Bank Rate and Cash Reserve Ratio (CRR) have been kept unchanged.
What is Bank Rate?

  1. The rate of interest charged by public sector banks from the general public.

  2. The rate of interest on housing loans.

  3. The rate of interest on educational loan.

  4. The rate at which the RBI discounts the bills of commercial banks.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Bank rate is defined as the rate at which the Reserve Bank of India is prepared to buy or rediscount bills of exchange or other commercial papers eligible for purchase under the Act.

Multiple choice instruments of monetary policy and the reserve bank of india money and banking economics

Who has been appointed the first-ever Chief Financial Officer (CFO) of the Reserve Bank of India (RBI)?

  1. Ashoke Sen

  2. Sudha Balakrishnan

  3. Jayant Narlikar

  4. E.C. George Sudarshan
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Sudha Balakrishnan, the Vice-President of National Securities Depository Ltd (NSDL), has been appointed the first-ever Chief Financial Officer (CFO) of the Reserve Bank of India (RBI). She will hold the rank of executive director and will have a 3-year term. The CFO will be responsible for reporting of financial information of the central bank, establishing accounting policies and ensuring compliance with regulations.


 The CFO will also be entrusted with communicating RBIs expected and actual financial performance and overseeing its budget processes. As CFO, Balakrishnan will also be in charge of the dividend RBI pays to the government, which is crucial in the final budgetary calculations. Under the RBI Act, 1934, the central bank is required to pay the government its surplus after making provisions for bad and doubtful debts, depreciation in assets and, contribution to staff and superannuation fund among others. RBI follows a July to June financial year.

Multiple choice instruments of monetary policy and the reserve bank of india money and banking economics

Which of the following is/are the benefit/s of the marginal cost of fund based lending rate (MCLR)? Use the code given below to select your answer:
1. Better transmission of the RBI's policy rates into the banks' lending rates.
2. Enhanced competition among the banks. 

  1. Only 1

  2. Only 2

  3. 1 and 2

  4. Neither 1 and 2
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

MCLR (Marginal Cost of Funds Based Lending Rate) was introduced to ensure better transmission of policy rates to lending rates and to enhance competition among banks by making the lending rate process more transparent.

Multiple choice instruments of monetary policy and the reserve bank of india money and banking economics

Select the correct statements related to the monetary policy announced by the RBI, using the code:
1. LAF includes repo, term repo and reserve repo.
2. RBI always keeps marginal standing facility rate higher than the repo rate.

  1. Only 1

  2. Only 2

  3. 1 and 2

  4. Neither 1 nor 2
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Liquidity Adjustment Facility includes RBI's repo and reverse repo operations (thus it includes the term repo operation also). Being a penal rate the marginal standing facility rate has to be higher than that of the repo rate.