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Questions and Answers Related To RBI

The Reserve Bank of India (RBI) is India's central bank established in 1935. Its key functions include regulating the country's banking system and monetary policy. Though originally privately owned, RBI was nationalized in 1949 and is now fully owned by the Indian government. Shaktikanta Das currently serves as the Governor of RBI. Some important terms related to RBI's monetary policy functions include the repo rate, reverse repo rate, statutory liquidity ratio, and cash reserve ratio. RBI also oversees the classification of non-performing assets and differences between real-time gross settlement and national electronic funds transfer systems.

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455 views3 pages

Questions and Answers Related To RBI

The Reserve Bank of India (RBI) is India's central bank established in 1935. Its key functions include regulating the country's banking system and monetary policy. Though originally privately owned, RBI was nationalized in 1949 and is now fully owned by the Indian government. Shaktikanta Das currently serves as the Governor of RBI. Some important terms related to RBI's monetary policy functions include the repo rate, reverse repo rate, statutory liquidity ratio, and cash reserve ratio. RBI also oversees the classification of non-performing assets and differences between real-time gross settlement and national electronic funds transfer systems.

Uploaded by

Rahul Prasad
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Questions and Answers related to RBI

1.What is RBI
Ans:- The Reserve Bank of India (RBI) is India's central bank and regulatory
body under the jurisdiction of Ministry of Finance, Government of India.

2.What are the main functions of RBI


Ans:- To regulate the issue of Bank notes and keeping of reserves with a view
to securing monetary stability in India and generally to operate the currency and
credit system of the country to its advantage; to have a modern monetary policy
framework to meet the challenge of an increasingly complex economy, to
maintain price stability while keeping in mind the objective of growth.

3.Establishment of RBI, Act of establishment and year of nationalization of RBI


Ans:- The Reserve Bank of India was established on April 1, 1935 in
accordance with the provisions of the Reserve Bank of India Act, 1934.
The Central Office of the Reserve Bank was initially established in Kolkata but
was permanently moved to Mumbai in 1937. The Central Office is where the
Governor sits and where policies are formulated.
Though originally privately owned, since nationalisation in 1949, the Reserve
Bank is fully owned by the Government of India.

4.Governer of RBI
Ans:- Shri Shaktikanta Das

5. Repo Rate
Ans:- Repo rate is the rate at which the central bank of a country (Reserve Bank
of India in case of India) lends money to commercial banks in the event of any
shortfall of funds.
As of 2021, RBI’s repo rate stands at 4%. The repo rate was reduced by 40 basis
points from 4.4% to 4% in May 2020. RBI keeps revising the repo rate and
reverse repo rate periodically according to the state of the economy.
6. Reverse Repo Rate
Ans:- Reverse repo rate is the interest rate paid to commercial banks when they
deposit their excess funds in the central bank or when the central bank borrows
money from them. As of 2021, RBI’s reverse repo rate stands at 3.35%. RRR is
always less than Repo rate.

7. SLR
Statutory liquidity ratio or SLR refers to the minimum percentage of deposits
that needs to be maintained by commercial banks in the form of liquid assets,
cash, gold, government securities, etc. The limit of SLR for commercial banks
is decided by the central bank of the country (Reserve Bank of India) but the
deposits are maintained by the respective banks themselves. However, the SLR
cannot be used by the bank for lending. The deposits designated towards SLR
are eligible for earning interests.

8. Cash Reserve Ratio


Ans:- Cash reserve ratio or CRR is a portion of a commercial bank’s total
deposits that needs to be maintained at the central bank of the country (which is
RBI in India). Here the deposit is in the form of liquid cash and has to be kept in
an account with the RBI. Banks are not allowed to utilize the CRR deposited for
giving out loans or for other lending purposes. Apart from that, CRR deposits
are also not eligible for earning interests. CRR helps in ensuring that the bank
always has enough cash to disburse when depositors need it.

9. NPA
Ans:- A non performing asset (NPA) is a loan or advance for which the
principal or interest payment remained overdue for a period of 90 days.
Banks are required to classify NPAs further into Substandard, Doubtful and
Loss assets.

a. Substandard assets: Assets which has remained NPA for a period less than or
equal to 12 months.
b. Doubtful assets: An asset would be classified as doubtful if it has remained in
the substandard category for a period of 12 months.
c. Loss assets: As per RBI, “Loss asset is considered uncollectible and of such
little value that its continuance as a bankable asset is not warranted, although
there may be some salvage or recovery value.”

10. Bank rate


Ans:- Bank rate is the rate charged by the central bank for lending funds to
commercial banks.

11. Difference between RTGS and NEFT


Ans:-
RTGS NEFT
Real-Time Gross Settlement (RTGS) National Electronic Funds Transfer
is another payment system in which (NEFT) is a payment system that
the money is credited in the facilitates one-to-one funds transfer.
beneficiary’s account in real-time and
on a gross basis.
Minimum transfer value is 2 Lakh Minimum transfer value is 1 Rs.

no maximum limit no maximum limit


RTGS funds transfer, the fund The money transferred is settled in
transfers in real time basis half hourly batch
There is some transaction charge No transaction charge

12.Commencement of RBI
Ans:- April 1, 1935
The Reserve Bank of India was set up on the basis of the recommendations of
the Hilton Young Commission. The Reserve Bank of India Act, 1934 (II of
1934) provides the statutory basis of the functioning of the Bank, which
commenced operations on April 1, 1935.

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