Reserve Bank of India & Monetary Policy

To stop the slide of the Rupee (depreciation), the RBI/Government needs to increase the inflow of foreign currency (USD) or decrease the outflow. Option (a), (b), and (c) are likely measures: They either increase the supply of dollars in the Indian market or reduce the demand for dollars, which helps stabilize the Rupee. Option (d) is NOT a likely measure: An expansionary monetary policy usually involves lowering interest rates. When interest rates fall, the "carry trade" becomes less attractive to foreign investors, leading to capital flight. This increases the supply of Rupee in the market and decreases its value further. To stop a slide, the RBI typically follows a contractionary (dear money) policy to attract capital and curb inflation.

The Inter-Creditor Agreement (ICA) signed by Indian banks and financial institutions is a mechanism to expedite the resolution of stressed assets, particularly in cases of consortium lending involving loans of Rs. 50 crore or more.

Statement 1 is Correct (Data storage in India): This is the core requirement of the directive. It mandates that the entire payment system data be stored in systems located only in India. This aims to improve data security and regulatory oversight. Statement 2 is Incorrect (Public sector ownership): The directive doesn't specify ownership requirements for the data storage systems. Private companies can also store data as long as the systems are located within India. Statement 3 is Incorrect (Audit report submission): The directive des not have reporting requirements for system audits to the Comptroller and Auditor General of India (CAG) which typically audits government entities.

Legal tender refers to money that is legally recognized for the payment of debts. This means that if a creditor offers you legal tender to settle a debt, you are legally obligated to accept it. Hence, option 'B' is the correct answer.

Air India was nationalised in 1953. The Government of India passed the Air Corporation Act in 1953 and purchased a majority stake in the carrier from Tata Sons. Imperial Bank of India was nationalised in 1955, with RBI taking a 60 per cent stake, and its name was changed to SBI. The first democratically elected communist party government was formed in a state in India in 1957. In the first general election held to the Kerala state legislative assembly in 1957, the Communist Party of India won 60 seats out of 126. Goa became an independent state of India on 18 Dec 1961, and Goa was freed from the Portuguese. On Dec 18 1961, Operation Vijay was launched by the Indian Government to bring back Goa into India. Therefore correct chronological sequence is 3-2-1-4

Statement 1 is correct. Capital Adequacy Ratio (CAR): This is a crucial regulatory tool used by central banks to ensure banks have sufficient capital reserves to absorb potential financial losses. It acts as a buffer to protect depositors' funds in case of loan defaults or other financial risks. Statement 2 is Incorrect. CAR is not decided by individual banks. The CAR is mandated and regulated by the central bank of a country, in India's case, the Reserve Bank of India (RBI). The RBI sets a minimum CAR that all banks operating in the country must adhere to. This ensures a level playing field and safeguards the financial system's stability.

Statement 1 is incorrect:
The Reserve Bank of India (RBI) manages and services both Central (Government of India) and State Government securities. RBI acts as a debt manager for both levels of government under agreements with the states. Statement 2 is correct:
Treasury Bills (T-bills) are issued only by the Government of India, not by the State Governments. States instead issue State Development Loans (SDLs) for their borrowing needs. Statement 3 is correct:
Treasury Bills are zero-coupon instruments — they are issued at a discount to the par (face) value and redeemed at par on maturity. The difference represents the interest earned.

Statement 1 is Correct: Small Finance Banks (SFBs) are niche banks specifically designed to cater to the underserved and unbanked sections of the population, including small businesses, marginal farmers, and micro-industries. Statement 2 is Correct: SFBs focus on financial inclusion by providing credit facilities to small businesses and marginal farmers. Statement 3 is Incorrect: In conclusion, While SFBs might indirectly contribute to rural development by providing credit to small businesses in rural areas, their primary objective is not explicitly to encourage young entrepreneurs to set up businesses there (option 3). Hence, option A is the correct answer.

Statement 1 is Correct: The Monetary Policy Committee (MPC) does decide the RBI's benchmark interest rates. This is its primary function, and it influences the cost of borrowing and lending in the economy. Statement 2 is Incorrect: The MPC is a 6-member body, not 12. It includes the Governor of RBI and other members appointed by the government. The committee is not reconstituted every year, but members serve for specified terms. Statement 3 is Incorrect: The MPC functions under the chairmanship of the Governor of RBI, not the Union Finance Minister. Therefore, the correct answer is 1 only. Hence, option A is the correct answer.

A scheme was launched by the Reserve Bank of India (RBI) on 13 June 2016, named Scheme for Sustainable Structuring of Stressed Assets (S4A Scheme) for addressing the large stressed assets of the corporate sector with banks. The S4A Scheme aims at the deep financial restructuring of big debted projects by allowing lenders (banks) to acquire equity of the stressed project. In this context, the scheme makes the financial restructuring of large projects at the same time helping the lender's ability to deal with such stressed assets. It is intended to restore the flow of credit to critical sectors including infrastructure. Hence, option B is the correct answer.