Q220. Which rate represents a benchmark below which banks were generally not permitted to price lending under the earlier base-rate framework?
[WBCS Mains 2021]
A. Reserve Rate
B. Base Rate
C. Bankruptcy Rate
D. Zero Coupon Rate
Answer: (B) Base Rate
Explanation: The base rate system prescribed a minimum benchmark for most bank lending before later MCLR-linked and external-benchmark frameworks developed. Its purpose was greater transparency in loan pricing and stronger transmission of monetary-policy changes.
Q219. Which action would not normally form part of an anti-inflationary monetary policy?
[WBCS Mains 2021]
A. Increasing the bank rate
B. Increasing reserve requirements
C. Buying government securities from the market
D. Rationing credit
Answer: (C) Buying government securities from the market
Explanation: RBI purchases of government securities inject money into the banking system and usually ease liquidity. Higher reserve requirements, rate increases and restrictive credit allocations tend to tighten financial conditions and suppress excessive demand.
Q218. Which is a qualitative credit-control method?
[WBCS Mains 2021]
A. Bank rate
B. Cash reserve ratio
C. Credit rationing
D. Broad-money aggregate publication
Answer: (C) Credit rationing
Explanation: Credit rationing selectively limits loans to borrowers or activities. It differs from quantitative tools such as reserve requirements and central policy rates, which change aggregate banking liquidity or financing costs more generally.
Q217. Which institution issues Indian banknotes apart from the government-issued one-rupee note?
[WBCS Mains 2021]
A. All branches of SBI
B. Reserve Bank of India
C. Parliament Secretariat
D. Insurance regulator
Answer: (B) Reserve Bank of India
Explanation: The Reserve Bank is the statutory issuer of banknotes; the one-rupee note is issued by the Union Government. In India, the issue of currency is distinct from banks creating deposits through lending.
Q216. Repo and reverse-repo rates mainly belong to which area of public policy?
[WBCS Mains 2021]
A. Customs duty administration
B. Agricultural procurement
C. Monetary and credit policy
D. Election expenditure monitoring
Answer: (C) Monetary and credit policy
Explanation: These rates feature in RBI short-term liquidity management and help transmit monetary policy to money markets and commercial banks. They do not directly set customs tariffs, farm procurement prices or election expenditure rules.
Q215. Which body’s recommendation was instrumental in setting up RBI?
[WBCS Mains 2021]
A. Simon Commission
B. Hilton Young Royal Commission
C. First Finance Commission
D. Narasimham Committee
Answer: (B) Hilton Young Royal Commission
Explanation: The Royal Commission on Indian Currency and Finance, commonly called the Hilton Young Commission, recommended creating a central bank. RBI was eventually established under the 1934 Act and began operations in April 1935.
Q214. Which authority is responsible for managing monetary policy in India?
[WBCS Mains 2021]
A. Moneylenders
B. Reserve Bank of India
C. Private industry associations
D. Election Commission
Answer: (B) Reserve Bank of India
Explanation: India’s central bank implements monetary policy within the statutory framework. The Monetary Policy Committee decides the policy repo rate, while RBI departments undertake supporting liquidity, reserve management and market operations.
Q213. Which combination contains the quantitative credit-control tools traditionally used by RBI?
[WBCS Mains 2021]
A. CRR, bank rate and open-market operations
B. CRR and moral suasion only
C. Margin requirements alone
D. Interest subsidies and import duties
Answer: (A) CRR, bank rate and open-market operations
Explanation: Reserve ratios, central-bank rate instruments and open-market transactions work on the overall availability or price of credit. Margin requirements and moral suasion, by contrast, are commonly treated as selective or qualitative controls.
Q212. What happens to potential commercial-bank credit creation when RBI lowers CRR?
[WBCS Mains 2021]
A. It generally increases
B. It must become zero
C. It invariably decreases
D. It becomes unrelated to deposits
Answer: (A) It generally increases
Explanation: Reducing CRR releases mandatory cash balances that banks otherwise must maintain with RBI. Subject to capital constraints and credit demand, banks can use the resulting additional liquidity to make more loans.
Q211. What policy change accompanied Narasimham Committee recommendations regarding Indian banking competition?
[WBCS Mains 2021]
A. Allowing entry of new private-sector banks
B. Permanently prohibiting private banks
C. Ending bank supervision
D. Replacing all banks with credit cooperatives
Answer: (A) Allowing entry of new private-sector banks
Explanation: The early 1990s banking reform agenda recommended more competitive and efficient intermediation. RBI developed licensing rules permitting a new generation of private-sector banks while retaining prudential norms, deposit safeguards and regulatory oversight.
