Read the Assertion and Reasoning and select the correct option. Assertion (A): The Reserve Bank of India is the apex organisation in the Indian money market. Reasoning (R): In April, 1988, it set up the Discount and Finance House of India (DFHI) to perform the function of stablising the money market in India.
(A) and (R) both are correct ; but (R) is not the right explanation of (A).
Let's analyze the given Assertion and Reasoning statements regarding the Reserve Bank of India (RBI) and the Indian money market.
Analyzing the Assertion (A): Reserve Bank of India as Apex Organisation
The Assertion (A) states: "The Reserve Bank of India is the apex organisation in the Indian money market."
- The Reserve Bank of India (RBI) is indeed the central bank and the primary regulatory authority for the entire Indian financial system, including the money market.
- It formulates and implements monetary policy, regulates banks and financial institutions, manages government debt, and acts as the lender of last resort.
- Its various functions and regulatory powers place it at the top of the financial hierarchy in India, making it the apex organisation.
Therefore, Assertion (A) is correct.
Analyzing the Reasoning (R): DFHI and Money Market Stabilisation
The Reasoning (R) states: "In April, 1988, it set up the Discount and Finance House of India (DFHI) to perform the function of stablising the money market in India."
- The Discount and Finance House of India (DFHI) was established in 1988 by the RBI, along with public sector banks and financial institutions.
- DFHI operates in the money market segments like commercial paper, certificates of deposit, treasury bills, and inter-bank call money.
- Its objective is to develop the money market and provide liquidity, thereby contributing to the stability of the money market.
Therefore, Reasoning (R) is also correct.
Relationship between Assertion (A) and Reasoning (R)
Now we need to determine if Reasoning (R) is the correct explanation for Assertion (A).
- Assertion (A) claims the RBI is the apex organisation due to its overall control and regulatory role over the Indian financial system, including the money market.
- Reasoning (R) describes one specific action taken by the RBI — setting up DFHI — which helps in developing and stabilising a *part* of the financial system (the money market).
- While setting up DFHI is an action taken by the RBI in its capacity as the apex body to influence the money market, it is not the fundamental reason *why* the RBI is considered the apex organisation. The apex status stems from its broad regulatory powers, control over monetary policy, role as banker to the government and banks, etc.
- Reasoning (R) describes a specific function performed by an entity established by the RBI, which contributes to the smooth functioning of the money market, but it doesn't explain the comprehensive reasons behind the RBI's apex position.
Thus, both Assertion (A) and Reasoning (R) are individually correct statements, but Reasoning (R) does not fully or correctly explain why Assertion (A) is true.
Conclusion on Assertion and Reasoning
Based on the analysis:
- Assertion (A) is correct.
- Reasoning (R) is correct.
- Reasoning (R) is not the correct explanation for Assertion (A).
This aligns with the option stating that both (A) and (R) are correct, but (R) is not the right explanation of (A).
| Statement | Correctness | Explanation |
|---|---|---|
| Assertion (A): RBI is the apex organisation in the Indian money market. | Correct | RBI is the central bank and primary regulator of the financial system. |
| Reasoning (R): RBI set up DFHI in 1988 to stabilize the money market. | Correct | DFHI was set up by RBI and others to develop and provide liquidity in the money market. |
| Is (R) the correct explanation of (A)? | No | Setting up DFHI is an action by the apex body, not the reason for its apex status. |
Therefore, the correct option is that both (A) and (R) are correct, but (R) is not the correct explanation of (A).
Important Questions from Banking Committees and Recommendations
The Securities and Exchange Board of India (SEBI) has recently constituted a committee on Social Stock Exchanges (SSE) under the chairmanship of ______.
Which of the following is NOT a qualitative characteristic that accounting should possess to be useful in decision making?
Which committee was appointed to give a detailed report on the Non Performing Assets of public sector banks?
Who was the chairman of the committee formed to examine the applications for new bank licenses?
The amalgamation of Vijaya Bank and Dena Bank with Bank of Baroda (BoB) came into effect from _________.
