Which of the following is a qualitative tool used by RBI to control money supply?
- A.Bank Rate
- B.Moral Suasion
- C.Open Market Operations
- D.Cash Reserve Ratio
Correct answer
Explanation
The correct answer is B, Moral Suasion. The tools of the Reserve Bank are divided into quantitative tools, which change the total amount of credit in the system, and qualitative or selective tools, which change the direction in which that credit flows. Moral suasion is the qualitative tool by which the Reserve Bank persuades banks through letters, meetings and advice, for example to lend less to a speculative sector, without issuing a binding order. The other qualitative tools are margin requirements, selective credit control, rationing of credit and direct action.
Option A, the bank rate, is the rate at which the Reserve Bank lends to banks without collateral, and changing it changes the cost of credit for everyone, so it is quantitative. Option C, open market operations, adds or removes money by buying or selling government securities, which is also quantitative. Option D, the cash reserve ratio, fixes how much of its deposits a bank must keep with the Reserve Bank, again a quantitative measure.
Read the full article: Banking Terms and Abbreviations: Full Forms and Meanings
Practice Questions
View allIn banking, the full form of RTGS is
- A.Rapid Transfer Gross Scheme
- B.Rapid Transfer Gross Settlement
- C.Real Time Gross Settlement
- D.Real Time Gross Scheme
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RTGS is the system in which a transfer instruction is settled singly and immediately, rather than being held and netted off with others.
Read the full explanation →Which of the following is an instrument of monetary policy used by RBI? I. SLR II. MSS III. Corridor
- A.I and II
- B.II and III
- C.I, II and III
- D.I and III
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All three belong to the monetary policy toolkit of the Reserve Bank of India. SLR, the Statutory Liquidity Ratio, is the part of its deposits that a bank must keep with itself in cash, gold or approved securities, and raising or lowering it changes how much a bank can lend.
Read the full explanation →To improve internal control of banks, Reserve Bank of India has asked all banks to do what till 30 April 2018?
- A.To connect SWIFT with its Basic Banking Solution (CBS)
- B.To connect RTGS with their Core Banking Solution (CBS)
- C.To connect NEFT with its Basic Banking Solution (CBS)
- D.To connect MICR to their Basic Banking Solution (CBS)
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SWIFT is the international messaging network over which banks send payment and guarantee instructions across borders.
Read the full explanation →An IFSC code used for electronic funds transfer in India consists of how many characters?
- A.9
- B.11
- C.13
- D.16
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The Indian Financial System Code is an eleven character alphanumeric code that identifies a particular bank branch taking part in the electronic payment systems of the Reserve Bank of India.
Read the full explanation →What is the minimum amount that can be remitted through RTGS in India?
- A.Rupees 10,000
- B.Rupees 50,000
- C.Rupees 1 lakh
- D.Rupees 2 lakh
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RTGS was designed for large value payments, so the Reserve Bank of India fixed a floor of two lakh rupees for a single transaction and set no ceiling at all.
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