Latest Reserve Bank Of India (RBI) question papers, test pattern and Placement papers 08.Dec.2023

RBI has two types’ subsidiaries:

  1. Fully owned subsidiary.
  2. Majority stack subsidiary.

The general techniques used by SCCs are:

  • Minimum margin for lending against security specified commodities is fixed.
  • Ceiling on maximum advances to individual borrower against stock of certain commodities.
  • Minimum discriminatory rates of interests prescribed for certain kinds of advances.
  • Prohibition of clean advances for financing hoardings of sensitive commodities.
  • Prohibition of the discounting of bills covering sale of sensitive commodities.

The GOVERNMENT OF INDIA has the authority of minting coins under the advisory of RBI.

The minting of coins is operated in the following cities:-

  • Mumbai
  • Noida
  • Kolkata
  • Hyderabad

RBI was established on 1 April 1935 in accordance with the provision of the Reserve Bank of India Act 1934.

Open market operation means purchase and sale of government securities by RBI from the public and banks on its own account.

There are four types of repos are in International Market:

  1. Buy-sell back Repo
  2. Classic Repo
  3. Bond lending/borrowing Repo
  4. Tripartite Repo

RBI accomplishes the off-site surveillance by means of OFF-SITE SURVEILLANCE AND MONITORING SYSTEM (OSMOS).

RBI was nationalized on 1 January 1949.

Reverse repo rate is the rate at which RBI borrows money from the Bank.

The rating system given by RBI for banking sector is known as CAMELS.

The significance of CAMELS is as follow:-

  • C - Capital adequacy ratio
  • A - Asset quality (level of NPA)
  • M - Management effectiveness
  • E - Earning (profitability)
  • L - Liquidity
  • S - System and control

Monetary policy uses the instruments under the central bank to regulate the availability of cost and use of money and credit. Its goal is achieving the specific economic objectives like low and stable inflation and promoting growth.

RBI objectives:

  • To maintain the price stability.
  • Ensure the flow of credit to the productive sector of the economy.
  • Support the economic growth.
  • Regulate the financial system.

Fixed deposits, cash certificates, cumulative and RDs, staff security deposits, deposit held as securities for advances etc. are time liabilities.

Liquidity Adjustment Facility, Open market operations, Market stabilization scheme, repo rate, reverse repo rate and bank rate the indirect instruments of monetary policy.

National Bank for Agriculture and Rural Development (NABARD) is the only Majority Stack Subsidiary of RBI.

There are four printing presses are available in India for printing notes. They are located at:-

  1. Dewas (Madhya Pradesh)
  2. Nasik (Maharashtra)
  3. Mysore (Karnataka)
  4. Salboni (West Bengal)

SCC depends upon the following factors:

  • The availability of non-bank finance.
  • The extent of effective credit restrictions
  • The degree of shortfall in supply in relation to normal demands.

Functions of RBI:

  • It formulates implements and monitors the monetary policies.
  • It maintains the price stability and ensures adequate flow of credit.
  • It protects depositor’s interest and provides cost effective banking services to the public.
  • It manages the Foreign Exchange Management Act, 199@
  • It provides facility to external trade and payment. 
  • It issues and exchanges the currency and coin and destroys too except 1Rs. 
  • It acts as bankers for the central and state government banks.

SLR:– Statutory Liquidity Ratio. It is the share of net demand and time liabilities that bank must maintain in safe and liquid assets such as cash, gold, government securities etc. Every bank has to maintain at the close of business every day.

Whenever the bank has any shortage of fund they can borrow it from RBI. Repo rate is the rate at which the bank can borrow the amount from RBI.

Two types of fund management schemes were introduced by the RBI which help the banks to maintain their funds:-

  1. Centralised fund management system (CFMS)
  2. Transfer of funds across deposit account department (DAD)

It includes daily infusion and absorption of liquidity on repurchase basis through repo and reverse repo using government security as collateral.

In Market Stabilization Scheme large capital flow is absorbed through selling of short-dated government securities and treasury bills.

The acronym of SCC is Selective Credit Control. It refers to the directives issued by RBI Banking Regulation Act 1949 to regulate the flow of bank credit against the selected commodities.

WMA stands for “Way and Mean Advances”. It is a short term loan from RBI to the GOVERNMENT OF INDIA which allows government to meet their financial requirements.

Banks keep a certain proportion of their total assets in the form of cash, partly to meet their statutory reserve requirement and partly to meet their own day to day needs for making payments. Hence cash is held partly in the form of “cash on hand” and the partly cash in the form of balances with the RBI. The ratio of bank’s balance with RBI to the banks net demand and time liabilities is called CRR.

Bank rate is the rate which RBI charges on the loan and advances extended to commercial banks and other financial intermediaries. It is a tool used by RBI to control the supply of money.

Following are some PARA-BANKING activities:-

  • Mutual funds business
  • Asset management
  • Insurance business
  • Merchant banking
  • Factoring service
  • Equity participation in venture capital
  • Leasing

Cash Reserve Ratio, Statutory Liquidity Ratio and Refinance Facilities are the direct instruments of Monetary Policy.

On 15 May 2013 RBI launched a new instrument called “Inflation Index Bonds (IIBs)” to protect the savings of poor and middle class people from inflation and insensitive household sectors.

Objectives of SLR:

  • To restrict expansion of banks credit.
  • To increase banks investment in approved securities.
  • To ensure solvency of banks.

RBI has three fully own subsidiaries: 

  1. National Housing Bank(NHB)
  2. Deposit Insurance and Credit Guarantee Corporation of India(DICGC)
  3. Bharatiya Reserve Bank Note Mudran Pvt. Ltd.(BRBNMPL)

RBI permits the bank to perform some activities other than banking. This is known as PARA-BANKING.