Which of these institutions fixes the Repo Rate and the Reverse Repo Rate in India?
- A.Ministry of Finance
- B.State Bank of India
- C.Comptroller and Auditor General of India
- D.Reserve Bank of India
Correct answer
Explanation
The correct answer is D, Reserve Bank of India. Policy rates are announced by the Reserve Bank, and since 2016 the decision is taken by its Monetary Policy Committee of six members under the chairmanship of the Governor. The repo rate is the rate at which banks borrow short term funds from the Bank against government securities, and the reverse repo is the rate at which the Bank absorbs their surplus funds, so both are instruments of the central bank and not of any other body.
Option A, the Ministry of Finance, sets the inflation target in consultation with the Bank and appoints three members of the Committee, but it does not fix the rates. Option B, the State Bank of India, is a commercial bank that borrows at these rates. Option C, the Comptroller and Auditor General, audits government accounts and has no role in monetary policy at all.
Read the full article: Functions of the RBI: Monetary Policy and Tools
Practice Questions
View allIn which year was the RBI nationalised?
- A.1971
- B.1956
- C.1949
- D.1935
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The Reserve Bank of India began as a shareholders' bank and was taken into public ownership on 1 January 1949 under the Reserve Bank (Transfer to Public Ownership) Act, 1948.
Read the full explanation →The legal provisions governing the management of foreign exchange reserves are laid down in the Reserve Bank of India Act, ______.
- A.1947
- B.1934
- C.1923
- D.1971
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The Reserve Bank of India Act, 1934 is the statute that created the Bank and it carries the provisions on the custody and deployment of the country's foreign exchange reserves, which the Bank holds and invests.
Read the full explanation →The Reserve Bank of India commenced its operations on
- A.1 April 1935
- B.1 July 1955
- C.1 January 1949
- D.1 April 1934
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The Reserve Bank of India Act was passed in 1934 and the Bank began work on the first day of April in the following year, with its central office at Calcutta.
Read the full explanation →The establishment of the Reserve Bank of India was recommended by which commission?
- A.Hilton Young Commission
- B.Narasimham Committee
- C.Fazl Ali Commission
- D.Sarkaria Commission
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Formally the Royal Commission on Indian Currency and Finance, it reported in 1926 and recommended that the currency and credit functions then divided between the Government and the Imperial Bank be placed in a single central bank.
Read the full explanation →Who was the first Governor of the Reserve Bank of India?
- A.C. D. Deshmukh
- B.Sir Osborne Smith
- C.Sir James Taylor
- D.Benegal Rama Rau
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He was the first Governor of the Reserve Bank, taking charge when the Bank opened in 1935, and he had earlier been a managing governor of the Imperial Bank of India.
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