Bank Rates and Monetary Policy Questions and Answers

Answer: C

Correct answer: 1 and 2

Bank rate and open market operations are instruments of monetary policy, operated by the Reserve Bank to influence the cost and availability of credit.

Public debt and public revenue belong to fiscal policy, which is the government's domain - how much it borrows and how much it raises in taxation. The distinction is the point of the question: monetary policy works through the central bank on money and credit, fiscal policy through the government on spending and taxation, and the two are conducted by different authorities.

Answer: B

Correct answer: Urjit Patel

Urjit Patel became the eighth Deputy Governor to be elevated to Governor of the Reserve Bank when he succeeded Raghuram Rajan in September 2016.

He had served as Deputy Governor in charge of monetary policy since 2013 and chaired the expert committee whose 2014 report proposed the inflation targeting framework - so his appointment brought to the top the architect of the régime the Finance Act 2016 had just given statutory form. Internal elevation is one of two routes to the office, the other being appointment from the civil service.

Answer: A

Correct answer: Temporary 100 percent CRR

The RBI withdrew the temporary incremental cash reserve ratio of 100 per cent that it had imposed on the deposits accumulated between mid-September and mid-November 2016.

The measure had been an emergency response to demonetisation, which flooded banks with cash they could not lend fast enough; requiring the whole of that increment to be held as reserves absorbed the excess liquidity at a stroke. Once market stabilisation scheme securities were available to absorb it more conventionally, the incremental requirement could be removed.

Answer: A

Correct answer: PNB

The RBI removed a restriction, in place for some seven years, on fresh purchases of Punjab National Bank shares by foreign investors.

Such bans are imposed automatically when aggregate foreign holding in a company reaches the sectoral ceiling - in a public sector bank, 20 per cent - and are lifted when the holding falls back below the trigger level. The mechanism is a monitoring device rather than a judgement on the bank, and the RBI publishes the list of companies currently caught by it.

Answer: A

Correct answer: Only a, b and c

Nationalised banks, regional rural banks and state co-operative banks are all included in the Second Schedule to the Reserve Bank of India Act, 1934, and are therefore scheduled banks.

Village-level primary co-operative societies are not: they are small, locally constituted bodies that cannot meet the capital and conduct requirements for inclusion. Scheduled status brings access to RBI refinance and to the clearing system, and with it the obligation to maintain the cash reserve ratio - privileges and duties that presuppose an institution of some size.

Answer: B

Correct answer: Interim Liquidity Adjustment Facility

The Interim Liquidity Adjustment Facility was introduced in April 1999 on the Narasimham Committee's recommendation, as a transitional arrangement that consolidated the RBI's various refinance and support facilities into a single framework.

It was replaced by the full Liquidity Adjustment Facility in June 2000, which moved to auction-based repo and reverse repo operations. The word "interim" records exactly that: a bridge between the older, fragmented refinance arrangements and the modern corridor system.

Answer: A

Correct answer: USD 372.73 billion

Foreign exchange reserves of USD 372.73 billion were a record at the time, built up through the RBI's purchases of foreign currency in a period of strong capital inflows.

Reserves serve as a buffer against external shocks and give the RBI the means to smooth disorderly movements in the rupee. Accumulating them has a domestic consequence, though: buying foreign currency injects rupees into the system, so the RBI sterilises the effect through open market sales of government securities.

Answer: D

Correct answer: All of the above

All three are among the customer rights the RBI monitors, drawn from the Charter of Customer Rights it adopted in 2014.

The right to privacy protects a customer's information from disclosure or use without consent; the right to fair treatment and transparency requires banks to deal without discrimination and to disclose terms clearly; and the right to suitability requires that a product sold be appropriate to the customer's circumstances. The last was a direct response to the mis-selling of insurance and investment products through bank branches.

Answer: A

Correct answer: Surekha Marandi

Surekha Marandi took office as an Executive Director of the Reserve Bank with effect from 2 January 2016.

Executive Directors head the Bank's operating departments and are appointed from within its own service, ranking immediately below the Deputy Governors. The other names offered also served as Executive Directors at various times, which is what makes the question one of dates rather than of role.

Answer: B

Correct answer: H. R. Khan

N. S. Vishwanathan succeeded H. R. Khan as a Deputy Governor of the Reserve Bank, his selection approved by the Appointments Committee of the Cabinet.

Khan had served as Deputy Governor from 2011, holding portfolios including financial markets, external investments and payment systems. Vishwanathan came from the RBI's own service and took charge of banking regulation and supervision, at a point when the recognition and resolution of stressed assets had become the Bank's most pressing supervisory problem.