BANKING GENERAL KNOWLEDGE
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
Increased sales of government securities to individuals or institutions who pay for them from their bank
|
|
|
Regulations requiring the banks to maintain positive end-of-day balances with the Bank of England
|
|
|
Both 1 and 2
|
|
|
Lower levels of taxation and reductions in tax receipts to the Treasury
|
Detailed explanation-1: -The principal factor behind the tightening liquidity is the hefty goods and service tax outflow, which typically happens around the 20th of every month.
Detailed explanation-2: -The Reserve Bank of India (RBI), under its Liquidity Adjustment Facility, infuses liquidity in the banking system via repos and sucks it out using reverse repos. The RBI, after assessing liquidity conditions, uses a 14-day variable rate repo and/or reverse repo operation. The quantum is decided by the RBI.
Detailed explanation-3: -Reserve money which includes currency in circulation and reserves, plays a crucial role in the determination of liquidity. Currency in circulation that comprises currency with the public and cash in hand with banks, is another autonomous driver of banking liquidity.
Detailed explanation-4: -Liquidity in the banking system refers to readily available cash that banks need to meet short-term business and financial needs.