BANKING AFFAIRS

BANKING GENERAL KNOWLEDGE

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

According to RBI Governor, which one of the following is a major challenge to its monetary policy?

A	Policies of World Trade Organisation
B	High cost of imports
C	Fiscal deficit
D	Inflation and supportive recovery of Economy

Explanation:

Detailed explanation-1: -The RBI controls Inflation and Deflation by employing a variety of monetary policy tools such as Repo Rate, Reverse Repo Rate, Bank Rate, Open Market Operations, Statutory Liquidity Ratio (SLR), Cash Reserve Ratio (CRR), Liquidity Adjustment Facility (LAF), Market Stabilisation Scheme.

Detailed explanation-2: -“…the primary objective of monetary policy is to maintain price stability while keeping in mind the objective of growth.”

Detailed explanation-3: -In the situation of inflation, the RBI aims to reduce the money supply. So, the RBI can increase CRR and/or SLR.

Detailed explanation-4: -Reserve Bank of India is the authority to control inflation through monetary policies which it does by increasing bank rates, repo rates, cash reserve ratio, buying dollars, regulating money supply and availability of credit.

There is 1 question to complete.