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Banking Awareness Practice Questions-Structure & Functions of RBI-Part-1

1. Which among the following is NOT a subsidiary of RBI?
[A]National Housing Bank
[B]NABARD
[C]Bharatiya Reserve Bank Note Mudran Private Limited
[D]SIDBI

Answer

SIDBI
RBI has four subsidiaries viz. Deposit Insurance and Credit Guarantee Corporation, DICGC; National Housing Bank; Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL) and NABARD.

2. The headquarters of local boards of RBI are located at__:
[A]Mumbai, Kolkata, Chennai and New Delhi
[B]Mumbai, Jaipur, Chennai and Mysore
[C]Mumbai, Ahmedabad, Chennai and New Delhi
[D]Mumbai, Ahmedabad,Jaipur and New Delhi

Answer

Mumbai, Kolkata, Chennai and New Delhi
The headquarters of local boards of RBI are in Mumbai, Kolkata, Chennai and New Delhi. The members of the local boards of RBI are appointed by the Central Government for a term of four years. Their main purpose is to advise the Central Board on local matters and to represent territorial and economic interests of local cooperative and indigenous banks; to perform such other functions as delegated by Central Board from time to time.

3. Which of the following is NOT a function of Reserve Bank of India?
[A]Controls the credit operations of banks through quantitative and qualitative tools
[B]Lender of the last resort
[C]Holds cash reserves of all the scheduled banks
[D]Manages Credit Rating of Banks

Answer

Manages Credit Rating of Banks
The Reserve Bank of India (RBI) was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934. The main functions of RBI: RBI controls the credit operations of banks through quantitative and qualitative tools, holds the cash reserves of all the scheduled banks, controls the banking system through the system of licensing, inspection and calling for information, acts as the lender of the last resort by providing rediscount facilities to scheduled banks, has sole right to issue bank notes of all denominations etc.

4. Under which section of the Reserve Bank of India (RBI) Act 1934, the RBI has the sole right to issue bank notes of all denominations?
[A]Section 24 of the RBI Act 1934
[B]Section 25 of the RBI Act 1934
[C]Section 21 of the RBI Act 1934
[D]Section 22 of the RBI Act 1934

Answer

Section 22 of the RBI Act 1934
Under Section 22 of the Reserve Bank of India (RBI) Act 1934 , the RBI has the sole right to issue bank notes of all denominations.

5. Under minimum reserve system, how much amount Reserve Bank of India (RBI) was required to keep in gold and foreign exchange reserves?
[A]Rs.200 crore
[B]Rs.220 crore
[C]Rs.222 crore
[D]Rs.280 crore

Answer

Rs.200 crore
Under minimum reserve system, the Reserve Bank of India (RBI) was required to keep gold and foreign exchange reserves of Rs. 200 crore, of which Rs. 115 crore in gold and Rs. 85 crore in foreign exchange form.

6. Which of the following is not the quantitative tool of the Reserve Bank of India (RBI)?
[A]OMO
[B]Reserve ratios
[C]Rationing of credit
[D]Statutory Pre-emptions

Answer

Rationing of credit
To control the cost and quantity of credit, quantitative tools are adopted by the Reserve Bank of India (RBI). The quantitative tools are the indirect tools viz. OMO, bank rate, SLR, CRR, repo rate, etc.

7. Under which of the following rates, the banks avail long term loans from Reserve Bank of India (RBI) by putting no collateral securities?
[A]Bank rate
[B]Repo rate
[C]Reserve repo rate
[D]Marginal Standing Facily

Answer

Bank rate
The bank rate (or discount rate) is the rate of interest at which banks take long term loans from Reserve Bank of India (RBI) by putting no collateral security. It is the rate at which RBI rediscounts the bills of exchange and government securities held by the commercial banks. For controlling the credit, inflation and money supply, RBI increases the bank rate.

8. Which of the following is / are included under Statutory Pre-emptions? 1. SLR 2. CRR 3. Bank Rate 4. Repo Rate Select the correct option from the codes given below:
[A]Only 1 & 2
[B]Only 1, 2 & 3
[C]Only 2, 3 & 4
[D]Only 1, 2 & 4

Answer

Only 1 & 2
Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) are called Statutory Pre-emptions. The RBI has been empowered by Banking Regulation Act and RBI act to mandate commercial banks to maintain a certain portion of their Net Demand and Time Liabilities (NDTL) in the form of cash with the Reserve Bank [this is called Cash Reserve Ratio (CRR)] and in the form of investment in unencumbered approved securities [this is called Statutory Liquidity Ratio (SLR)]. They are statutory because they get their legality from Banking Regulation Act 1949.

9. Which among the following is most important functions being done by SLR in recent times?
[A]Control of Inflation
[B]Cushion against bank failures
[C]Financing Government deficits
[D]Adjustment of liquidity

Answer

Financing Government deficits
There are three purposes to keep SLR. These are: It is an instrument of credit control It works as a cushion against the possibility of bank failures It is a conduit for financing government deficits. We note here that SLR is not very frequently changed; so as an instrument of Credit Control; its role is limited. However, most important function SLR is doing in current times is to “finance the government deficit”.

10. How Bank Rate is different from Repo rate?
[A]While Repo Rate is a short-term measure, Bank Rate is a long-term measure
[B]While Bank Rate is a short-term measure, Repo Rate is a long-term measure
[C]While Repo Rate is used to control money supply, Bank Rate is used to control inflation
[D]While Bank Rate is used to control money supply, Repo Rate is used to finance government debt

Answer

While Repo Rate is a short-term measure, Bank Rate is a long-term measure
Bank Rate and Repo Rate seem to be similar terms because in both of them RBI lends to the banks. Repo Rate is a short-term measure and it refers to short-term loans and used for controlling the amount of money in the market. On the other hand, Bank Rate is a long-term measure and is governed by the long-term monetary policies of the RBI.

Comments

  • Deepak S S
    Reply

    Thanks,Gk Today

    We aspirants expect more questions related to banking especially for upcoming RBI,IBPS PO and RRB exams 2015,and also try to provide English quiz .Thanks again.