BANKING GENERAL KNOWLEDGE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The government has announced an array of steps to check the rising Current Account Deficit (CAD), and the fall in rupee. The steps to be taken by the government to attract dollar inflows into the country include
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Reviewing of mandatory hedging condition for infrastructure loans
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To permit manufacturing sector entities to avail of External Commercial Borrowing (ECBs) up to$ 50 million with minimum maturity of one year, instead of the earlier limit of three years
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Removal of withholding tax on rupee-denominated bonds known as Masala bonds issued till March 2019
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All of the above
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Explanation:
Detailed explanation-1: -The steps include letting foreign investors invest in short-term corporate debt, purchasing more government securities under the fully accessible route, doubling the borrowing limit of domestic companies, and so on. However, the question remains: Why did the RBI have to take such desperate measures?
Detailed explanation-2: -Encouraging Indian borrowers to issue rupee-denominated Masala Bonds is a measure of the RBI/government to stop the slide of Indian rupee as it does not put pressure on our currency through borrowing dollars as the bond issue would be rupee denominated. Hence statement 2 is correct.
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