A on - Tools of Monetary control

1. State whether each of the following statements are 'True' or 'False'.
T: a) RBI is the regulator of banks and the securities market in India.
T: b) RBI started functioning from 1934 and onwards.
T: c) RBI maintains the financial stability of financial institutions in India.
F: (d) Notes in the denomination from Rupee 1 to Rupees 1000 are issued by RBI.
F: e) RBI appoints the CEOs of private sector banks.

F: f) RBI has no power to amalgamate weaker banks with strong banks.
F: g) Credit Authorisation and Consortium of Finance schemes of RBI are still mandatory for commercial banks in India.
F: h) RBI currently draws its powers of regulating exchange control from FERA, 1973.
F: i)   All scheduled bank branches can handle foreign exchange transactions.
F: j)   SLR is lower than CRR.
*(k) As there is no sub-target for the SSI sector, it does not comprise the Priority Sector.
2. Fill in the blanks in the following sentences with appropriate word(s).
a) The Indian Banking System is regulated in terms of the provisions of , Act, 1934 and Act, 1949.
b) In USA and UK, the banking regulators are  And  respectively.
c) RBI is a owned institution.
d) The Central Board of Directors of RBI comprises one ------------, four and fifteen -------------.
e) New and reissuable notes are stored in --------  ----------- maintained by banks as    of RBI.
(f) RBI acts as the to the Central and Governments.
(g) In the Indian Banking System, RBI acts as the bank and also as lender of the ----------  ----------------.
(h) A decrease in the Bank Rate is likely to lead to a ----- in interest rates of banks.
(i) Monetary and Credit policy is issued by ------ each year ---- times.
(j) A decrease in CRR will -------. the liquidity in the banking system.
(k) To control inflationary situation in the economy, RBI can increase one or more of these monetary tool ---- or/ and ----- or / and -------.
3. Write the full form of the following  acronyms.
(a) FERA (b) FEMA (c)
(d) CRR (e) SLR (f)
(g) OMO (h) SCC (i)
(j)   SSI (k) DRI
4. Terminal Questions.
(a) Explain precisely the various reasons for regulating the banking system in a country.
(b) Enumerate the main supervisory powers of RBI over commercial banks.
(c) Explain the effect of an increase in the CRR and SLR on the banking system. Can RBI use
both of these monetary tools simultaneously?
(d) Does RBI have the power to control or influence directly or indirectly the interest rates of
banks in India and if so, in what manner and to what extent?
(e) Give at least eight examples of the Priority Sector. Also explain the rationale of PSA.
(a) False
(d) False
(g) False
(j)   False
1. (a) Reserve Bank of India; Banking Regulation

(b) Federal Reserve Board; Bank of England
(c) State
(d) Governor; Deputy Governors; Directors
(e) Currency Chests; agents       

 (f)  Banker; State
(g) Bankers'; last resort 

(h) Decrease
(i)   RBI; two 

(j)   Improve
(k) CRR; SLR; Bank Rate

3. (a) Foreign Exchange Regulation Act (c) Authorised Dealers (e)  Statutory Liquidity Ratio (g) Open Market Operations (i)   Priority Sector Advances (k) Differential Rate of Interest
 (b) False
(e) True
(h) False
(k) False
(b) Foreign Exchange Management Act
(d) Cash Reserve Ratio
(f)  Demand and Time Liabilities
(h) Selective Credit Control
(j)   Small Scale Industries
 (c) True
(f) False
(i)   False

(b) Foreign Exchange Management Act
(d) Cash Reserve Ratio
(f)  Demand and Time Liabilities
(h) Selective Credit Control
(j)   Small Scale Industries

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