Q340. Which of the following best expresses a principal responsibility of the Reserve Bank of India?
[WBCS Mains 2023]
A. Determining farm procurement quotas
B. Maintaining financial stability
C. Building regional highways
D. Setting industrial wage rates
Answer: (B) Maintaining financial stability
Explanation: Financial stability is a principal central-bank responsibility. RBI supervises regulated financial entities, oversees payment systems and manages monetary conditions. Agricultural production targets, public works and industrial wages generally fall within other governmental and regulatory mandates.
Q339. Which RBI decision would usually increase the banking system’s ability to create credit?
[WBCS Mains 2023]
A. Raising the statutory liquidity ratio
B. Raising the repo rate
C. Lowering the cash reserve ratio
D. Imposing more selective restrictions
Answer: (C) Lowering the cash reserve ratio
Explanation: A CRR reduction releases funds that banks otherwise keep as mandatory balances with RBI. This raises deployable liquidity and can permit credit growth. A higher SLR or repo rate and tighter sectoral restrictions instead usually restrain lending.
Q338. Which Indian Prime Minister had earlier served as Governor of the Reserve Bank of India?
[WBCS Mains 2023]
A. P. V. Narasimha Rao
B. Manmohan Singh
C. Indira Gandhi
D. Jawaharlal Nehru
Answer: (B) Manmohan Singh
Explanation: Manmohan Singh headed the Reserve Bank of India from 1982 to 1985 and subsequently served as Prime Minister between 2004 and 2014. His career also included economic policymaking at the Ministry of Finance and other national institutions.
Q337. What is the main target of the RBI’s selective credit control measures?
[WBCS Mains 2023]
A. Loans for public transportation
B. Credit used to hoard scarce commodities and speculate in them
C. All export-credit facilities
D. Borrowing for authorised industrial machinery
Answer: (B) Credit used to hoard scarce commodities and speculate in them
Explanation: Selective controls seek to change credit availability for particular commodities, borrowers or purposes rather than overall liquidity. They have traditionally discouraged speculative accumulation of scarce goods by adjusting margins, rationing credit or prescribing lending restrictions.
Q336. Which combination reflects developmental functions historically undertaken by RBI?
[WBCS Mains 2023]
A. Promotion of banking habits only
B. Setting up specialised financing institutions only
C. Expansion of banking into rural areas only
D. All three activities
Answer: (D) All three activities
Explanation: Alongside currency, regulation and monetary policy, RBI historically promoted wider banking usage, helped establish development-finance institutions and supported rural banking access. These institution-building efforts sought to extend formal financial services beyond established urban centres.
Q335. Under India’s currency arrangements, who issues banknotes of denominations above one rupee?
[WBCS Mains 2023]
A. Finance Ministry
B. Reserve Bank of India
C. State Bank of India
D. Ministry of Commerce
Answer: (B) Reserve Bank of India
Explanation: The RBI has the statutory authority to issue banknotes in India, apart from the one-rupee note, which is issued by the Government of India. The distinction reflects the legal division between central-bank notes and government-issued currency.
Q334. On what reserve basis does RBI issue banknotes under the minimum-reserve system?
[WBCS Mains 2023]
A. Only promissory notes
B. Only rupee coins
C. Minimum holdings of gold and foreign securities
D. An equal amount of silver against each rupee
Answer: (C) Minimum holdings of gold and foreign securities
Explanation: India follows a minimum reserve system of note issue, under which RBI maintains prescribed gold and foreign-security reserves. The system does not require backing every note by an equivalent weight or value of precious metal.
Q333. Commercial banks chiefly create deposit money through which activity?
[WBCS Mains 2023]
A. Printing legal-tender notes
B. Lending against their deposit resources
C. Issuing debit cards without deposits
D. Collecting tax on securities
Answer: (B) Lending against their deposit resources
Explanation: When commercial banks extend loans, deposits and spending balances expand within the banking system. The process operates within regulatory, capital and liquidity constraints. Legal-tender banknote printing, by contrast, is a central-bank function.
Q332. In the expression repo transaction, the term REPO refers to which arrangement?
[WBCS Mains 2023]
A. A repurchase arrangement
B. A reverse payment order
C. A rupee purchase obligation
D. A regional payment option
Answer: (A) A repurchase arrangement
Explanation: A repurchase transaction involves selling eligible securities with an agreement to buy them back, generally after a short period. The arrangement supplies secured short-term funds, with securities acting as collateral for the borrowing.
Q331. What is the usual immediate effect on banks’ cash reserves when RBI sells securities in the open market?
[WBCS Mains 2023]
A. Reserves increase
B. Reserves decrease
C. Reserves are legally frozen
D. Reserves automatically double
Answer: (B) Reserves decrease
Explanation: Banks and other purchasers pay RBI for the securities. That payment withdraws rupee liquidity from the financial system and tends to reduce reserves. Selling securities is therefore generally a contractionary open-market operation.
