The cash reserve ratio refers to the portion of a bank's deposits that must be

The correct answer is A, 1 April 1935. The Reserve Bank of India was constituted under the Reserve Bank of India Act of 1934, on the recommendation of the Hilton Young Commission, and started functioning on 1 April 1935 with its central office at Calcutta, which was shifted permanently to Bombay in 1937.

Option B, 1 January 1949, is the date on which the Reserve Bank was nationalised and passed from private shareholders to full government ownership, so it is a real date but answers a different question. Option C, 1 July 1955, is the date on which the Imperial Bank of India was converted into the State Bank of India. Option D, 19 July 1969, is the date on which fourteen large commercial banks were nationalised. All four dates appear together in option sets, so learn them as a group with the event attached to each.

The correct answer is C, M3. M3 is M1 plus time deposits with banks, and it is called broad money or the aggregate monetary resource. It is the measure the Reserve Bank follows most closely because it captures both spendable balances and funds held for a fixed term.

Option A, M0, is reserve money or high-powered money, made up of currency in circulation, bankers' deposits with the Reserve Bank and other deposits with it; it is the base on which credit is created, not broad money. Option B, M1, is narrow money, being currency with the public plus demand deposits plus other deposits with the Reserve Bank, and it is the most liquid measure. Option D, M4, is M3 plus total post office deposits other than national savings certificates, and it is the widest but least used measure. The ranking by liquidity runs M1, M2, M3, M4, from most to least liquid.

The correct answer is B, the Reserve Bank lends short-term funds to banks against government securities. In a repurchase or repo transaction a bank sells government paper to the Reserve Bank and agrees to buy it back shortly afterwards at a slightly higher price; the difference works out as interest at the repo rate. It is the main operating instrument of monetary policy, and a rise in it makes borrowing costlier for banks and so for their customers.

Option A describes the lending rate charged to customers, which banks fix themselves under a benchmark framework laid down by the Reserve Bank. Option C describes the reverse repo rate, the rate at which the Reserve Bank absorbs surplus funds from banks, which is always below the repo rate. Option D is the savings deposit rate, which banks are free to decide. Keep repo and reverse repo the right way round by remembering that in a repo the Reserve Bank gives money and in a reverse repo it takes money.

The correct answer is C, Fourteen. On 19 July 1969 the government nationalised fourteen of the largest commercial banks in the country, the aim being to take banking to rural areas, direct credit to agriculture and small industry, and end the concentration of bank funds in a few business houses.

Option A, six, is the number of banks nationalised in the second round in April 1980, so it is a correct figure attached to the wrong year. Option B, twelve, does not correspond to any round of nationalisation and is put in only as a near miss. Option D, twenty, is the total of the two rounds taken together, fourteen plus six, and is the trap most often chosen. Read the year in the question carefully, because papers ask the same fact as 1969, as 1980 and as the combined total.

The correct answer is C, the Government of India. The one rupee note and all coins are issued by the Government of India through the Ministry of Finance, and the one rupee note carries the signature of the Finance Secretary rather than that of the Governor of the Reserve Bank. The Reserve Bank acts only as the agency that distributes them.

Option A, the Reserve Bank of India, issues every currency note of a denomination above one rupee, and those notes carry the Governor's signature, but not the one rupee note. Option B, the State Bank of India, is a commercial bank and does no note issue at all, although it acts as an agent of the Reserve Bank in places where the latter has no office. Option D, the Security Printing and Minting Corporation of India, runs the presses and mints that physically print notes and strike coins, but printing is not issuing. The distinction between issuing and printing is exactly what this question tests.