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Powers and Functions of Reserve Bank of India

Description: This quiz is designed to test your knowledge on the powers and functions of the Reserve Bank of India (RBI). The RBI is the central bank of India and plays a crucial role in managing the country's monetary and financial system. The quiz covers various aspects of RBI's powers and functions, including its role as a regulator, banker to the government, and manager of foreign exchange reserves.
Number of Questions: 15
Created by:
Tags: rbi central bank monetary policy financial regulation foreign exchange
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What is the primary objective of the Reserve Bank of India?

  1. To maintain price stability

  2. To promote economic growth

  3. To ensure financial stability

  4. To manage the country's foreign exchange reserves

Show answer
Correct Option: A
Explanation:

The primary objective of the RBI is to maintain price stability, which means keeping inflation under control. This is achieved through various monetary policy tools, such as setting interest rates and managing the money supply.

Which of the following is not a function of the Reserve Bank of India?

  1. Issuing currency notes

  2. Regulating commercial banks

  3. Managing the country's foreign exchange reserves

  4. Providing loans to individuals

Show answer
Correct Option: D
Explanation:

The RBI does not provide loans to individuals. This is the function of commercial banks and other financial institutions.

What is the role of the Reserve Bank of India as a banker to the government?

  1. Managing the government's debt

  2. Providing financial advice to the government

  3. Acting as the government's fiscal agent

  4. All of the above

Show answer
Correct Option: D
Explanation:

The RBI acts as a banker to the government by managing the government's debt, providing financial advice, and acting as the government's fiscal agent.

What is the role of the Reserve Bank of India in managing foreign exchange reserves?

  1. To maintain a stable exchange rate

  2. To facilitate international trade and payments

  3. To prevent excessive volatility in the foreign exchange market

  4. All of the above

Show answer
Correct Option: D
Explanation:

The RBI manages foreign exchange reserves to maintain a stable exchange rate, facilitate international trade and payments, and prevent excessive volatility in the foreign exchange market.

Which of the following is not a monetary policy tool used by the Reserve Bank of India?

  1. Open market operations

  2. Reserve requirements

  3. Discount rate

  4. Fiscal policy

Show answer
Correct Option: D
Explanation:

Fiscal policy is not a monetary policy tool. It is a tool used by the government to influence the economy through taxation and spending.

What is the role of the Reserve Bank of India in regulating commercial banks?

  1. To ensure the safety and soundness of banks

  2. To promote competition and efficiency in the banking sector

  3. To protect the interests of depositors and creditors

  4. All of the above

Show answer
Correct Option: D
Explanation:

The RBI regulates commercial banks to ensure their safety and soundness, promote competition and efficiency in the banking sector, and protect the interests of depositors and creditors.

Which of the following is not a power of the Reserve Bank of India?

  1. To issue currency notes

  2. To regulate the money supply

  3. To set interest rates

  4. To print money

Show answer
Correct Option: D
Explanation:

The RBI does not have the power to print money. This is the function of the government.

What is the role of the Reserve Bank of India in promoting financial inclusion?

  1. To provide banking services to the unbanked and underbanked population

  2. To promote financial literacy and awareness

  3. To encourage the use of digital financial services

  4. All of the above

Show answer
Correct Option: D
Explanation:

The RBI promotes financial inclusion by providing banking services to the unbanked and underbanked population, promoting financial literacy and awareness, and encouraging the use of digital financial services.

Which of the following is not a function of the Reserve Bank of India's Monetary Policy Committee?

  1. To set the repo rate

  2. To set the reverse repo rate

  3. To set the bank rate

  4. To set the cash reserve ratio

Show answer
Correct Option: D
Explanation:

The cash reserve ratio is set by the RBI, not the Monetary Policy Committee.

What is the role of the Reserve Bank of India in managing inflation?

  1. To use monetary policy tools to control inflation

  2. To coordinate with the government on fiscal policy

  3. To promote competition in the product and labor markets

  4. All of the above

Show answer
Correct Option: D
Explanation:

The RBI uses monetary policy tools to control inflation, coordinates with the government on fiscal policy, and promotes competition in the product and labor markets to manage inflation.

Which of the following is not a function of the Reserve Bank of India's Foreign Exchange Management Act (FEMA)?

  1. To regulate foreign exchange transactions

  2. To prevent money laundering

  3. To promote foreign investment

  4. To set interest rates

Show answer
Correct Option: D
Explanation:

Setting interest rates is not a function of FEMA. It is a function of the RBI's monetary policy.

What is the role of the Reserve Bank of India in promoting economic growth?

  1. To provide financial support to industries and businesses

  2. To promote investment and entrepreneurship

  3. To create a favorable investment climate

  4. All of the above

Show answer
Correct Option: D
Explanation:

The RBI promotes economic growth by providing financial support to industries and businesses, promoting investment and entrepreneurship, and creating a favorable investment climate.

Which of the following is not a function of the Reserve Bank of India's Payment and Settlement Systems Act (PSS Act)?

  1. To regulate payment and settlement systems

  2. To promote the use of electronic payments

  3. To ensure the safety and efficiency of payment systems

  4. To set interest rates

Show answer
Correct Option: D
Explanation:

Setting interest rates is not a function of the PSS Act. It is a function of the RBI's monetary policy.

What is the role of the Reserve Bank of India in managing financial stability?

  1. To regulate financial institutions

  2. To promote financial inclusion

  3. To address systemic risks

  4. All of the above

Show answer
Correct Option: D
Explanation:

The RBI manages financial stability by regulating financial institutions, promoting financial inclusion, and addressing systemic risks.

Which of the following is not a function of the Reserve Bank of India's Credit Information Companies (Regulation) Act (CICRA)?

  1. To regulate credit information companies

  2. To protect the rights of consumers

  3. To promote competition in the credit information industry

  4. To set interest rates

Show answer
Correct Option: D
Explanation:

Setting interest rates is not a function of CICRA. It is a function of the RBI's monetary policy.

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