The Reserve Bank of India Questions and Answers

Answer: C

Correct answer: Total value of currency notes constitutes the liabilities of Reserve Bank of India

A banknote is a promise to pay, so it is a liability of the institution making the promise. Notes issued therefore appear on the liabilities side of the Reserve Bank's balance sheet, in the Issue Department.

Against them the Bank holds assets - gold, foreign securities, rupee securities - which back the issue, and that is where the assets side lies. The Central Government guarantees the notes under Section 26 but does not carry them as its own liability, which is what separates the keyed option from the one naming the Government.

Answer: D

Correct answer: Both 1 and 2

The bank rate and the repo rate are both policy rates set by the Reserve Bank and reviewed at each monetary policy meeting.

The savings bank deposit rate is not. It was deregulated in October 2011, since when each bank sets its own rate, and the RBI neither fixes nor reviews it. The deregulation was deliberate: administered deposit rates blunted competition between banks for retail deposits, and freeing them was expected to reward the banks offering savers better terms.

Answer: C

Correct answer: Banking Ombudsman Scheme

The Banking Ombudsman Scheme was formulated by the Reserve Bank under Section 35A of the Banking Regulation Act, first in 1995 and revised several times since, to provide customers with a free and expeditious forum for complaints against banks.

It fits the RBI's mandate because customer protection follows from its regulation of banks. The other three are Government schemes with quite different sponsors: MGNREGA under the Ministry of Rural Development, Rashtriya Swasthya Bima Yojana under Labour and Employment, and Jan Dhan Yojana under the Ministry of Finance.

Answer: D

Correct answer: 15%

The capital of a regional rural bank is held in fixed proportions: the Central Government 50 per cent, the sponsor bank 35 per cent and the State Government 15 per cent.

The split reflects the three interests the design tried to combine. The Centre provided the policy impetus and the majority of the funds; the sponsor bank supplied management, training and commercial discipline; and the State Government brought local administrative support. The proportions have remained unchanged since the banks were established in 1975.

Answer: D

Correct answer: London Inter Bank Offered Rate

LIBOR was the rate at which major banks in London indicated they could borrow from one another, published daily for several currencies and tenors, and used as the reference rate for an enormous volume of loans and derivatives worldwide.

It was compiled from submissions rather than transactions, which proved its undoing: manipulation of those submissions was uncovered from 2012, and the benchmark has since been retired in favour of rates computed from actual overnight transactions, such as SOFR in dollars and SONIA in sterling.