BANKING GENERAL KNOWLEDGE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Which of the following would result in a fall in asset prices?
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Low liquidity in the economy
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High liquidity in the economy
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RBI increasing the Reserve Repo Rates
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RBI allowing more banks to play
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Explanation:
Detailed explanation-1: -How does liquidity impact rates? Funds shortage leads to spike in short-term borrowing rates, which block banks from cutting lending rates. This also results in a rise in bond yields. If the benchmark bond yield rises, corporate borrowing cost too, increases.
Detailed explanation-2: -These capital inflows put a lot of pressure on the liquidity management here as uncontrolled capital flows can result in rising inflation, currency appreciation, loss of competitiveness and reduction in monetary control.
There is 1 question to complete.