Consider the following statements regarding Reserve Bank of India :
It is a banker to the Central Government.
It formulates and administers monetary policy.
It acts as an agent of the Government in respect of India’s membership of IMF.
It handles the borrowing programme of Government of India.
Which of these statements are correct?
Correct Answer:
(C) 1, 2, 3 and 4
The Reserve Bank of India (RBI) is the Central Bank of India, which was established on April 1, 1935, under the RBI Act. The main functions of the RBI are – Banker to banks; Formulation and administration of monetary policy; Debt and cash management for Central and State Governments; Foreign exchange management (current and capital account management); Regulation and supervision of the banking and non-banking financial institutions including credit information companies; Management of foreign exchange reserves; Banker to the Central and State Governments; Oversight of the payment and settlement system; Currency management; Developmental role; and Research and statistics. RBI acts as an agent of the Government in respect of India’s membership in IMF.
Ques: 2
The Reserve Bank of India regulates the commercial banks in matters of :
liquidity of assets
branch expansion
merger of banks
winding-up of banks
Select the correct answer using the codes given below
Correct Answer:
(D) 1, 2, 3 and 4
Ques: 3
In India, the central bank's function as the 'lender of last resort' usually refers to which of the following?
Lending to trade and industry bodies when they fail to borrow from other sources.
Providing liquidity to the banks having a temporary crisis.
Lending to governments to finance budgetary deficits.
Select the correct answer using the code given below :
Correct Answer:
(B) 2 only
As a banker to banks, the Reserve Bank acts as the 'lender of the last resort' (LoLR). It refers to the rescue of a bank that is solvent but faces temporary liquidity problems by supplying it with much needed liquidity when no one else is willing to extend credit to that bank. Thus, under LoLR, the RBI provides emergency money or liquidity to the bank when the latter faces financial stringency. In other words, LoLR is a financial safety net provided by the RBI to commercial banks. Hence, option (b) is the correct answer.
Ques: 4
The Reserve Bank of India has the power to print currency notes of Rupees upto :
Correct Answer:
(A) Rs. 10,000
The Reserve Bank of India has the power to print currency notes in the denomination of up to 10,000. At present, the RBI issues the notes in the denomination of Rs. 10, Rs. 20, Rs. 50, Rs. 100, Rs. 200, and Rs. 500.
Ques: 5
Note issuing department of RBI should always possess the minimum gold stock of worth :
Correct Answer:
(B) Rs 115 crore
The system of note issue by the Reserve Bank of India was founded on the proportional reserve system which was replaced by a system of minimum holding of foreign securities (Minimum Reserve System) of Rs. 400 crore and gold coin and bullion of Rs. 115 crore or a total of Rs. 515 crores in 1956. Under the Reserve Bank (Second Amendment) Act, 1957, the aggregate value of gold coin, gold bullion and foreign securities in the Issue Department was stipulated at not less than Rs. 200 crores at any time, of which the value of gold coin and bullion should at no time be less than Rs. 115 crores. These stipulations have not been revised since then.
Ques: 6
Who is authorized to issue coins in India ?
Correct Answer:
(B) Ministry of Finance
The Government of India (Ministry of Finance) is the issuing authority of coins and supplies coins to the Reserve Bank on demand. The Reserve Bank puts the coins into circulation on behalf of the Central Government. Coins are minted by the Government of India. The Reserve Bank is the agent of the Government for distribution, issue and handling of coins. Four mints are in operation : Mumbai in Maharashtra, Noida in Uttar Pradesh, Kolkata (W. Bengal), and Hyderabad (Telangana).