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Why This Topic Repays the Effort
Monetary policy questions look intimidating and are actually mechanical. Every question reduces to one of three things: *what is this rate*, *who holds this money*, or *which way does the money supply move*. Learn those three and the chapter is yours.
The Reserve Bank of India was established on 1 April 1935 under the RBI Act, 1934, on the recommendation of the Hilton Young Commission (1926). It was nationalised on 1 January 1949. Its headquarters started in Kolkata and moved to Mumbai in 1937. The first Governor was Sir Osborne Smith; the first Indian Governor was C. D. Deshmukh.
One detail examiners love: the RBI issues every currency note except the one-rupee note, which is issued by the Ministry of Finance and carries the Finance Secretary's signature. Notes are issued under the Minimum Reserve System, in force since 1957, which requires a reserve of ₹200 crore — ₹115 crore in gold and ₹85 crore in foreign securities.
1. If the Cash Reserve Ratio (CRR) is 5%, what is the value of the money multiplier?
2. Where is the Cash Reserve Ratio (CRR) maintained by a commercial bank?
3. The rate at which the Reserve Bank of India lends short-term funds to commercial banks against government securities is called:
4. Which rate forms the upper bound (ceiling) of the Liquidity Adjustment Facility corridor?
5. How many members does the Monetary Policy Committee (MPC) of India have?
6. Under India's flexible inflation targeting framework, what is the CPI inflation target set for the RBI?
7. When was the Reserve Bank of India established?
8. To control rising inflation, the Reserve Bank of India would most likely: