Important Questions about RBI for Bank Exams

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Hi friends I am Madhusudhan from Vizag (Andhra Pradesh). Yesterday I have shared some Important Questions about Regional Rural Banks (you can read that post from here). Today I am going to share another important topic, Important Questions about RBI. These questions are very very important for all Banking Exams like IBPS PO, Clerks and RRBs. Read it twice and write down, so that you wont forget them again.  All the Best :)

What is RBI ?

• RBI (Reserve Bank of India) is India’s Central Banking Institution.

When did RBI came into existence ?

•  RBI came into existence on 1st April 1935 as a private share holder.

RBI was Nationalized in which year ?

• On 1st January 1949.

Where is the Head Quarters of RBI ?

• Mumbai.

RBI has how many Regional Offices ?

• 19 regional offices.

RBI Prints currency in how many languages ?

• It prints currency in 15 languages.

RBI came into existence on recommendations of which commission ?

• It came into existence on recommendation of Hilton Young (Royal) commission as per RBI act 1934.

RBI is the member bank of which international organizations ?

• It is the member bank of Asian clearing Union (ACU) and IMF(International Monetary Fund)

Does RBI pay interest on government deposits ?

• No. RBI does not pay interest on government deposits

What are the Functions of RBI ?

• Monetary Authority
• Regulator and supervisor of the financial system
• Manager of Foreign Exchange
• Issuer of currency
• Developmental role(Functions to support national objectives)
• Banker to Banks
• Banker to the Government

RBI is said to be Banker to the Banks. Which functions it performs as Bankers' Bank ?

• Keeps a part of cash reserves of the banks
• Short term lending
• Centralized clearing facility

Under which system does RBI issues currency notes ?

• Currency notes are issued by RBI under “Minimum Reserve system 1957” with backing of 200 Cr Reserve(Gold : Rs. 115Cr + Foreign Securities Rs.85 Crore)

What are the monetary instruments used by RBI to control credit and to bring stability in the economy ?

• Bank Rate, Repo Rate, Reverse Repo Rate, Cash Reserve Ratio, Statutory Liquidity Ratio

What is Bank Rate ?

• Bank Rate, also known as discount rate at which RBI (central bank) lends to commercial banks and other financial institutions. It is usually for longer period.
• In simple words, it is basically borrowing money from someone and then paying interest. This rate is decided by central bank depending upon the demand and supply of money in an economy.

What is Repo rate ?

• It is the rate at which banks takes money from RBI for a short period of time by selling their financial assets to RBI with an agreement to repurchase it in future.

What is Reverse Repo Rate ?

• The rate at which RBI borrows from the commercial bank. RBI uses Reverse repo rate when it feels there is too much money floating in the banking system.
• Both Repo and Reserve repo rate are used as policy instruments for day to day liquidity management under the liquidity adjustment facility.

What is Cash reserve Ratio ?

• Cash reserve Ratio (CRR) is the amount of funds that the banks have to keep with RBI. RBI increases the CRR rate to drain out the excessive cash from the banks.

What is Statutory Liquidity Ratio ?

• SLR (Statutory Liquidity Ratio) is the amount a commercial bank needs to maintain in the form of cash, or gold or govt. approved securities (Bonds) before providing credit to its customers.
• SLR rate is determined and maintained by the RBI (Reserve Bank of India) in order to control the expansion of bank credit. SLR is determined as the percentage of total demand and percentage of time liabilities. SLR is used to control inflation and propel growth.

What are Open Market Operations ?

• It involves buying and selling of government securities by RBI to influence the volume of cash reserves with commercial banks.

 What is the Structure of RBI ?

• Central Board of Directors
• One Governor (Dr. Raghuram Rajan)
• Four Deputy Governors(4 is the maximum)
• H R Khan, 
• Dr Urjit Patel, 
• R Gandhi and 
• SS Mundra.
• Four Non official Directors(which is nominated by Central Government. -Each non-official director represent the local boards in Delhi, Chennai, Kolkata and Mumbai)
• Ten Non official directors(Nominated by RBI)
• One representative of Central Government
• Committee of Central Boards
• Board of Financial Supervision
• Board of Payment and Settlement systems
• Subcommittees of central board
• Local Boards

What is Current Bank Rate ?

• Bank Rate : 8.25%

What is Current Repo Rate ?

• Repo Rate : 7.25%

What is Current Reverse Repo Rate ?

• Reverse Repo Rate : 6.25%

What is current Cash Reserve Ratio ?

• Cash Reserve Ratio (CRR) : 4%

What is current SLR ?

• Statutory Liquidity Ratio (SLR): 21.50%

What is current MSF ?

• Marginal Standing Facility(MSF): 8.25%

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