Statement I: A bank's main liability is the deposits it holds.
Statement II: Open Market Operations involve buying and selling government bonds.
Statement III: The Bank Rate is the rate at which RBI lends to commercial banks.
To determine which of the given statements about banking operations are correct, we must analyze each statement:
- Statement I: A bank's main liability is the deposits it holds.
This statement is correct. In the context of a bank's balance sheet, deposits are typically considered a liability because they represent money the bank must return to depositors on demand or at a specified time. Depositors expect their funds back, and therefore, from the bank's perspective, this is a liability. - Statement II: Open Market Operations involve buying and selling government bonds.
This statement is also correct. Open Market Operations (OMOs) are a key tool used by a country's central bank to control the money supply. By buying government bonds, the central bank injects liquidity into the economy (increasing the money supply), and by selling them, it withdraws liquidity (decreasing the money supply). - Statement III: The Bank Rate is the rate at which RBI lends to commercial banks.
This statement is correct as well. The Bank Rate is the interest rate at which a nation's central bank (such as the Reserve Bank of India, RBI) lends money to domestic banks. Adjusting the bank rate is one method the central bank uses to control monetary policy.
Given that all three statements accurately describe elements of banking operations and monetary policy, the correct choice is:
Similar Questions
- The RBI launched the Lead Bank Scheme (LBS) to mobilise deposits and step-up lending to weaker sections of the economy. When was the scheme launched?
- The pilot project for UPI was launched in which year?
- What was the recommendation of the Narasimham Committee-II regarding public sector banks?
- The amount of Cash Reserves that commercial banks are required to keep with the RBI is referred to as:
- What was the recommendation regarding entry of foreign banks in India?
- What significant institutional development emerged from banking reforms after 1991 to regulate financial stability?
Important Questions from Banking
What is the thinking behind adapting the “sky blue” coloured theme in the Economic Survey 2018-19?
What is the meaning of reverse repo rate?
- The RBI launched the Lead Bank Scheme (LBS) to mobilise deposits and step-up lending to weaker sections of the economy. When was the scheme launched?
Which one is not included in Non-Banking Financial Institutions (NBFIs)?
What is the role of "Ombudsman" in a bank?
