A proportion of the total deposits and reserves of the commercial banks is to be kept with the central bank (RBI). Which one of the following represents this proportion?
- A.Statutory Liquidity Ratio
- B.Cash Reserve Ratio
- C.Minimum Reserve System
- D.Reverse Repo Rate
Correct answer
Explanation
The correct answer is B, Cash Reserve Ratio. The Cash Reserve Ratio (CRR) is the share of a bank's deposits that it must keep with the Reserve Bank of India in cash, and the bank earns no interest on this money. The RBI fixes the CRR under Section 42 of the RBI Act, 1934, and uses it to control the money supply: raising the CRR leaves banks with less money to lend, while cutting it releases funds into the economy. The ratio is worked out on a bank's net demand and time liabilities, which are mainly its deposits. Option A is wrong because the Statutory Liquidity Ratio is kept by the bank itself, in cash, gold or approved government securities, not deposited with the RBI. Option C is wrong because the Minimum Reserve System is the rule under which the RBI keeps a minimum stock of gold and foreign exchange to back the currency it issues. Option D is wrong because the reverse repo rate is the rate at which the RBI borrows money from banks. Exam tip: CRR is kept with the RBI; SLR is kept by the bank itself.
Practice Questions
View allAccording to the law of diminishing marginal utility, as the amount of a good consumed increases, the marginal utility of that good tends to
- A.improve
- B.diminish
- C.remain constant
- D.first diminish and then improve
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Each extra unit of a good gives a consumer less additional satisfaction than the unit before it, so marginal utility falls as consumption rises.
Read the full explanation →Consider the following statements about impact of tax : 1. A tax is shifted forward to consumers if the demand is inelastic relative to supply. 2. A tax is shifted backward to producers if the supply is relatively more inelastic than demand. Which of the statements given above is/are correct?
- A.1 only
- B.2 only
- C.Both 1 and 2
- D.Neither 1 nor 2
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The burden of a tax falls more heavily on whichever side of the market is less elastic, the side that cannot easily walk away.
Read the full explanation →UBI, as an alternative for subsidies in poverty alleviation, stands for
- A.Union Basic Income
- B.Undefined Basic Income
- C.Unconditional Basic Income
- D.Universal Basic Income
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UBI is the idea of paying every citizen a fixed sum of money regularly, without conditions, in place of a large number of separate subsidies and welfare schemes.
Read the full explanation →Who among the following is the Chairman of the Fourteenth Finance Commission?
- A.C. Rangarajan
- B.Vijay Kelkar
- C.Y. V. Reddy
- D.Rakesh Mohan
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The Fourteenth Finance Commission, set up in 2013 for the award period 2015-2020, was chaired by Y. V. Reddy, a former Governor of the Reserve Bank of India.
Read the full explanation →Why was constitutional amendment needed for introducing GST?
- A.States were not willing to agree with the Union for introduction of GST without amendment in the Constitution.
- B.GST was to be implemented on concurrent base and Article 246 was inadequate for such a case.
- C.The Empowered Committee of Finance Ministers had recommended for constitutional amendment.
- D.The GST Council had recommended for constitutional amendment so that its power enhances.
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GST is levied by the Union and the States together on the same supply, and Article 246, which splits taxing powers between them through separate lists, did not allow such a concurrent tax.
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