RBI, Monetary Policy, Banking Terminology - One Line Questions

1. What is 'Rehypothecation' in banking? — A bank using customer assets pledged as collateral for its own borrowing
2. What is 'Monetary Policy Committee' (MPC)? — A committee responsible for setting the policy repo rate
3. What does 'Inflation' mean? — A sustained increase in the general price level of goods and services
4. What is the 'Marginal Standing Facility' (MSF)? — A facility for banks to borrow from the RBI at a rate higher than the repo rate
5. What is 'Liquidity Adjustment Facility' (LAF)? — A facility for banks to manage their short-term liquidity mismatches
6. What does 'Non-Performing Asset' (NPA) refer to in banking? — A loan where the principal or interest payments are overdue for a specified period
7. What is a 'Demand Draft'? — A payment instrument issued by a bank on its own behalf, payable on demand
8. What is a 'Cheque'? — An order to a bank to pay a specified sum of money from the drawer's account
9. What is 'Deflation'? — A general decrease in the price level of goods and services
10. When the RBI conducts 'Repo' operations under LAF, it: — Injects liquidity into the market
11. Which of the following is a qualitative tool of monetary policy? — Selective Credit Control
12. What is 'Basel Norms' related to? — Banking supervision and capital adequacy
13. What is the 'Repo Window' under the Liquidity Adjustment Facility? — Banks borrow from RBI
14. What is the 'Reverse Repo Window' under the Liquidity Adjustment Facility? — RBI borrows from banks
15. What is 'Endorsement' of a cheque? — Signing on the back of a cheque to transfer ownership or for other purposes
16. What is 'Selective Credit Control'? — Regulating credit to specific sectors of the economy
17. What is 'Narrow Money' (M1)? — Currency with the public + Demand deposits with banks + Other deposits with RBI
18. Which type of inflation is characterized by rising costs of production? — Cost-push inflation
19. What is 'Moral Suasion' as a tool of monetary policy? — Persuading banks to follow certain policies without legal compulsion
20. Which of the following is a tool of monetary policy used by the RBI? — Repo rate
21. When the RBI wants to stimulate economic growth, it typically: — Reduces the CRR
22. When the RBI conducts 'Reverse Repo' operations under LAF, it: — Absorbs liquidity from the market
23. The RBI's primary mandate regarding currency is to: — All of the above
24. What is 'Priority Sector Lending' (PSL)? — Loans given to sectors identified by the government as important for the country's development
25. What is 'Broad Money' (M3)? — M1 + Time deposits with banks
26. Which of the following is a feature of 'Fiscal Policy'? — Government spending and taxation
27. Which of the following is a quantitative tool of monetary policy? — Cash Reserve Ratio (CRR)
28. The RBI manages the country's foreign exchange reserves. This function is related to: — Exchange rate management
29. What is 'Broad Money' (M3) also known as? — Aggregate Monetary Resources
30. Which term refers to the rate at which commercial banks lend to each other for short periods? — Call Money Rate
31. What is meant by 'Banker to the Government' function of the RBI? — Managing the government's banking accounts and transactions
32. What is the 'Lender of Last Resort' role of the RBI? — Providing emergency liquidity to banks facing a shortage
33. When the RBI wants to curb inflation, it typically: — Increases the CRR
34. What is the primary role of the Reserve Bank of India (RBI)? — Issuing currency and managing monetary policy
35. What is 'Banker to Banks' function of the RBI? — Providing loans to commercial banks and acting as a lender of last resort
36. Open Market Operations (OMOs) involve the RBI: — Buying and selling government securities
37. What does 'Dishonour of a Cheque' mean? — The bank refuses to pay the amount due to insufficient funds or other reasons
38. What is 'Net Interest Margin' (NIM) for a bank? — The difference between interest income and interest expenses, expressed as a percentage of interest-earning assets
39. Who heads the Monetary Policy Committee (MPC)? — The Governor of the RBI
40. What is the 'Prime Lending Rate' (PLR)? — The interest rate at which banks lend to their most creditworthy customers
41. What does 'Statutory Liquidity Ratio' (SLR) represent? — The minimum percentage of deposits that banks must maintain in liquid assets like government securities and cash
42. Who sets the target for inflation in India? — The Reserve Bank of India
43. What is the Cash Reserve Ratio (CRR)? — The percentage of total deposits that banks must keep with the RBI in the form of cash
44. What does 'Repo Rate' signify in monetary policy? — The rate at which the RBI lends to commercial banks against government securities
45. What is the 'Reverse Repo Rate'? — The rate at which the RBI borrows money from commercial banks
46. What is the 'Bank Rate'? — The rate at which the RBI lends to commercial banks for long-term needs
47. What is 'Capital Adequacy Ratio' (CAR)? — The ratio of a bank's capital to its risk-weighted assets
48. What is the primary purpose of 'Know Your Customer' (KYC) norms in banking? — To verify customer identity and address to prevent money laundering and fraud
49. What is the role of the RBI in managing India's foreign exchange reserves? — To intervene in the foreign exchange market to maintain stability and manage reserves
50. What is the main objective of monetary policy? — To control inflation and promote economic growth
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