Select the techniques of monetary control adopted by RBI from the following : (a) Cash Reserve Ratio (b) Statutory Liquidity Ratio (c) Bank Rate (d) Currency Rate Codes :
(a), (b), (c)
The Reserve Bank of India controls money supply and credit through quantitative (general) and qualitative (selective) instruments.
(a) Cash Reserve Ratio is the share of net demand and time liabilities that banks must keep as cash balance with the RBI; raising it absorbs liquidity. It is an RBI tool.
(b) Statutory Liquidity Ratio is the share of NDTL that banks must hold in liquid assets such as government securities, gold and cash; it limits lendable funds. It is an RBI tool.
(c) Bank Rate is the standard rate at which the RBI is prepared to buy or rediscount bills of exchange or other commercial paper (Section 49 of the RBI Act); since 2012 it has been aligned with the Marginal Standing Facility rate and serves as a signal of the cost of credit and as the penal rate on reserve shortfalls. It is an RBI tool.
(d) "Currency Rate" is not a monetary control technique; the exchange rate is a market outcome the RBI may influence, but it is not a credit control instrument like the others.
Hence, (a), (b), (c).
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Important Questions from Reserve Bank of India
Which of the following is not the function of Reserve Bank of India?
Which of the following banks issues currency notes in India?
Who is the Governor of the Reserve Bank of India? (As of 2017)
Which of the following statements related to the Reserve Bank of India (RBI) is/are true?
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I. RBI was established under the Reserve Bank of India Act, 1935.
II. RBI maintains a current account of State Governments for keeping their cash balances.
III. Sir Benegal Rama Rau was the longest serving governor of RBI.
Which of the following functions of Reserve Bank of India are correct?
I. Banker to Banks
II. Currency Issuer
