UNIT-1 PART 3 Flashcards
What are the two main roles of the Reserve Bank of India (RBI)?
Regulatory and Developmental roles.
What is the main goal of RBI’s regulatory role?
Ensuring financial stability through policies like managing money supply and controlling inflation.
What is the purpose of RBI’s developmental role?
Promoting financial inclusion and supporting sectoral growth.
Name the 5 key regulatory functions of RBI.
Monetary policy management
Bank supervision
Currency issuance
Foreign exchange management
Payment system oversight
What does RBI’s currency issuance role involve?
Issuing and maintaining the quality and circulation of Indian currency.
How does RBI manage foreign exchange?
By regulating transactions and managing forex reserves to stabilize the rupee.
Mention developmental roles of RBI
Promoting financial inclusion
Supporting priority sectors
Developing financial markets
Financial literacy initiatives
Establishing specialized institutions
Q: What is Adjusted Net Bank Credit (ANBC)?
ANBC is the base used to calculate banks’ required lending to priority sectors (40% of ANBC). Under Priority Sector Lending(PSL) Guidelines
Q: Define monetary policy.
It is the process by which the RBI manages money supply and interest rates to achieve macroeconomic objectives like inflation control and economic growth.
What are the tools of monetary policy?
Repo Rate
Reverse Repo Rate
Open Market Operations (OMO)
Reserve Requirements (CRR, SLR)
Discount Rate
What is the current repo rate (April 2025)?
6%
What is the current reverse repo rate (April 2025)?
3.25%
What are the 4 main objectives of monetary policy
Price Stability
Exchange Rate Stability
Employment Generation
Credit to Priority Sectors
Banking Sector Development
What framework does India follow for inflation targeting?
Flexible Inflation Targeting (FIT) with a 4% ± 2% CPI inflation band.
How does monetary policy support employment?
By lowering interest rates, it encourages business expansion and job creation.
Why is monetary policy important for economic development?
It helps maintain price stability, promote growth, ensure employment, stabilize markets, and manage exchange rates.
How does monetary policy impact financial markets?
It manages liquidity and reduces excessive risk-taking, promoting stability.
