Q250. Under the conventional interest-rate corridor, how is the repo rate normally positioned relative to reverse repo?
[WBCS Mains 2022]
A. Generally above the reverse-repo rate
B. Always below it
C. Always identical
D. Equal to bond yields by law
Answer: (A) Generally above the reverse-repo rate
Explanation: In the conventional liquidity-adjustment corridor, banks borrow from RBI at a rate above the rate received for placing surplus liquidity with it. The precise framework and corridor instruments may be changed through monetary-policy decisions.
Q249. What effect does an RBI announcement increasing CRR normally have on loanable resources?
[WBCS Mains 2022]
A. It increases government lending capacity
B. It increases RBI foreign assets
C. It reduces resources available for commercial-bank lending
D. It eliminates bank deposits
Answer: (C) It reduces resources available for commercial-bank lending
Explanation: A larger share of bank liabilities must be maintained as mandatory reserves with RBI. Consequently less liquidity remains available to support loans, putting downward pressure on the potential credit multiplier.
Q248. What was the central focus of the Sukhamoy Chakravarty Committee?
[WBCS Mains 2022]
A. Agricultural land ceilings
B. Tariff protection
C. Direct-tax slabs
D. Reform of the monetary system
Answer: (D) Reform of the monetary system
Explanation: The Chakravarty Committee reviewed the operation of India’s monetary system and recommended strengthening monetary management, including attention to monetary targets and price stability. It was not principally a committee on farmland, tariffs or income taxation.
Q247. What does RBI mean by open-market operations in government securities?
[WBCS Mains 2022]
A. Changing cash-counter hours
B. Directing all bank loans
C. Purchases and sales of government securities
D. Discontinuing foreign-currency trade
Answer: (C) Purchases and sales of government securities
Explanation: Open-market operations are central-bank transactions in government securities. Purchases normally add rupee liquidity and sales absorb it. Their monetary effect distinguishes them from bank inspections, branch administration or direct lending instructions.
Q246. Which of the following is primarily a trade-policy issue, not a principal objective of monetary policy?
[WBCS Mains 2022]
A. Economic stability
B. Price stability
C. Direct regulation of foreign trade
D. Orderly monetary conditions
Answer: (C) Direct regulation of foreign trade
Explanation: Monetary authorities address inflation, liquidity and aspects of financial and exchange-rate stability. Import-export rules and direct trade restrictions are largely set through commerce and fiscal policy, outside monetary policy’s primary mandate.
Q245. What reform direction did banking-sector reform committees recommend for statutory liquidity requirements?
[WBCS Mains 2022]
A. Gradually reducing excessive statutory pre-emptions
B. Increasing SLR without limit
C. Removing deposit insurance
D. Banning interbank settlement
Answer: (A) Gradually reducing excessive statutory pre-emptions
Explanation: Banking reforms aimed to reduce high mandatory pre-emption of bank resources through reserve and liquidity requirements. Easing these burdens was intended to improve credit allocation and allow more market-based financial intermediation.
Q244. Which approach to bank interest rates is associated with post-1991 financial liberalisation?
[WBCS Mains 2022]
A. Permanent government fixation of every rate
B. Progressive deregulation of interest rates
C. Compulsory zero interest on all loans
D. Prohibiting savings deposits
Answer: (B) Progressive deregulation of interest rates
Explanation: Interest-rate deregulation reduced administrative control over deposit and lending rates. The reform sought to improve market allocation of credit, pricing transparency and banking competition while RBI retained important regulatory and monetary-policy functions.
Q243. How do open-market operations compare with direct controls on bank lending?
[WBCS Mains 2022]
A. They are indirect market transactions
B. They are a tax on household income
C. They involve issuing bank licences only
D. They are compulsory agricultural loans
Answer: (A) They are indirect market transactions
Explanation: RBI conducts open-market transactions in eligible securities to influence system-wide liquidity indirectly. Their effect runs through bank reserves and market rates rather than through individually ordered loans or direct sector-by-sector credit quotas.
Q242. In a liquidity-injecting repo operation, RBI generally performs what role?
[WBCS Mains 2022]
A. It borrows cash from banks without collateral
B. It lends cash against eligible securities
C. It cancels deposits
D. It issues equity to investors
Answer: (B) It lends cash against eligible securities
Explanation: A repo injects short-term rupee funds to counterparties against eligible securities, coupled with an agreement to reverse the transaction. The borrowing institution obtains liquidity while securities provide protection to RBI.
Q241. Which of these institutions manages India’s foreign-exchange reserves?
[WBCS Mains 2022]
A. State governments exclusively
B. District commercial banks
C. Reserve Bank of India
D. Only stock exchanges
Answer: (C) Reserve Bank of India
Explanation: RBI manages India’s official foreign-exchange reserves under the prevailing policy and legal framework. The reserves support external liquidity and orderly market conditions; they are distinct from the private foreign assets owned by individuals or companies.
