RBI - General awareness questions on current affairs

1)   Who is the new ED of the RBI w.e.f. 2nd Jan 2016?

a. Surekha Marandi
b. US Paliwal
c. G Mahalingam
d. KK Vohra
Answer  Explanation 

ANSWER: Surekha Marandi

Explanation:
Reserve Bank of India has appointed Smt. Surekha Marandi as the ED in place of US Paliway who retired on Dec 31, the bank announced on 3rd Jan 2016.

RBI handed over charge to Marandi who assumed office on 2nd Jan 2016. She will look afterConsumer Education and Protection Department, Financial Inclusion and Development Department, and Secretary's Department, as per an RBI release.

Previous posts held by Marandi include serving on Boards of United Bank and Bank of Baroda.

Prior to being promoted as ED, Marandi was Principal Chief General Manager and Chief Vigilance Officer in the Reserve Bank.

She has, over a span of three decades, served in regulatory and supervisory, financial inclusion and development and human resource management areas in the Reserve Bank.

Know More About Surekha Marandi

  • Surekha Marandi started her career with the RBI in May 1983 and has over 30 years of banking experience.
  • She has been working for various offices at the RBI, including departments of supervision, management services, information technology, human resources management, rural planning and credit.
  • Along with holding many positions in various capacities such as Banking Ombudsman, Maharashtra and Goa, she has been associated with various committees.
  • These are including committees on customer service, financial inclusion and education, financial stability and financial sector planning for the state of Chhattisgarh.
  • She has been a Non Executive Director of Bank of Baroda since June 10, 2014.
  • She served as a Nominee Director of United Bank of India from July 30, 2010 to March 13, 2014.
Marandi holds a Master's Degree in Arts from the Jadavpur University in Kolkata, West Bengal. She has trained at several foreign universities as well.


2)   Who is RBI's youngest deputy governor?

a. R. Gandhi
b. Viral V Acharya
c. Raghuram Rajan
d. None of the above
Answer  Explanation 

ANSWER: Viral V Acharya

Explanation:
Viral V. Acharya was on 26th Dec 2016 made the Deputy Governor of Reserve Bank of India (RBI). He is a professor of economics at New York University.

He will be joining the ranks of Vishwanathan, S S Mundra, R Gandhi as one of four Deputy Governors of RBI.

He will be serving under RBI Governor Urjit Patel.

He has served as the CV Starr Professor of Economics at the New York University Stern School of Business since 2008.

He has researched regulation of banks and financial institution, credit risk, corporate debt and asset pricing.

He has a lot of experience in the field of global finance.

In 2015, Acharya co-authored a research paper that analysed the precarious condition of public sector banks in India.

He was also on the International Advisory Board of Securities and Exchange Board of India.

He was the recipient of numerous awards including the Rising Star in Finance Award.


3)   RBI has opposed which move of the Watal Committee?

a. Digital payments
b. Separate entity to regulate payments and settlements
c. Cashless transactions
d. None of the above
Answer  Explanation 

ANSWER: Separate entity to regulate payments and settlements

Explanation:
The Reserve Bank of India (RBI) has opposed a move to establish a separate entity to regulate payments and settlements as recommended by Ratan Watal Committee for Digital Payments.

The 11-member committee was formed in September 2016 by the Union Finance Ministry to review existing payment systems in country and recommend appropriate measures for encouraging Digital Payments.

One of the committee’s terms of reference was to study and recommend changes in the regulatory mechanism under various acts such as the RBI Act, Payments and Settlement Act, and the Information Technology Act among others.

Based on this, the committee had recommended making regulation of retail payments independent from the function of RBI to give digital payments boost.

It called for establishing separate Payments Regulatory Board (PRB) as an independent body for retail payments and suggested that RBI’s regulation must be kept only for SIPS (systemically important payment system).

According to RBI, the global practice is that both the SIPS and retail payment systems are under the central bank for a variety of reasons including issues of inter-connectivity between the systems and the role of the central bank as the lender of last resort (LOLR).

RBI has suggested a monetary-policy-committee-style structure for the PRB, where outcomes are decided independently, but implementation remains with the banking regulator.


4)   Government will amend the RBI Act to extinguish the validity of which notes?

a. INR 2000
b. INR 1000
c. INR 500
d. Only b and c
e. All the above
Answer  Explanation 

ANSWER: Only b and c

Explanation:
Government is likely to amend the Reserve Bank of India Act to extinguish the validity of INR 500 and 1000 printed before November 9 and a reference to this effect would be made in the upcoming Budget.

As part of the demonetisation process, there would be a law to make these notes invalid and it can be made effective from March 31, sources said.

In 1978, when the currency was banned, the law to annul the validity came ahead.

This time the government acted under 26 (2).

As per RBI Act Section 26 (2), the central government, on the recommendation of the Central Board of RBI, may by notification in the Gazette of India, declare that, with effect from such date as may be specified in the notification, any series of bank notes of any denomination shall cease to be legal tender.

Banks have received Rs. 12 lakh crore demonetised currency notes as against Rs. 15.5 lakh crore. The government expects Rs. 13 lakh crore to come back to banking system.

Higher dividend from the RBI due to cancellation of INR 500/1000 may not be applicable until the RBI law is amended.

RBI has issued currency notes worth over Rs. 4.27 lakh crore to public through banks and ATMs following the demonetisation of old high value bills.


5)   RBI kept repo rate unchanged at 6.25 percent. What did it abolish?

a. Temporary 100 percent CRR
b. 30 percent CRR
c. 40 percent CRR
d. None of the above
Answer  Explanation 

ANSWER: Temporary 100 percent CRR

Explanation:
Reserve Bank of India (RBI) on 7th Dec 2016 kept its key lending - the repo rate - unchanged at 6.25 percent.

This move ended hopes of lower borrowing costs to arrest the demonetisation-induced slide in spending and investment.

The Monetary Policy Committee felt that the assessment is clouded by the still unfolding effects of the withdrawal of specified bank notes (SBNs).

It also lowered its growth forecast for 2016-17 to 7.1 percent from 7.6 percent earlier.

The MPC also decided to restore the cash reserve ratio (CRR) - the proportion of deposits banks are required to park with the RBI - at 4 percent.

The surge in post-demonetisation liquidity had prompted the RBI to temporarily ask banks to park the entire mountain of additional cash as 100 percent cash reserve ratio (CRR) with the central bank.

RBI revised the ceiling on issuance of securities under the market tabilization scheme (MSS) to INR 6 lakh crore, from the previous limit of INR 30,000 crore for financial year 2016-17.

Banks were not in favour of a higher CRR, as parking funds with the RBI in this window does not fetch any returns, and works against lowering lending rates for final individual and corporate borrowers.

India’s Repo Rate

  • Stands for: Repurchase Option.
  • Since January 2015, the RBI has cut the repo rate six times. India’s retail inflation has touched 4.20 percent in October, triggering hopes of a rate cut.
  • The RBI and the government have set a retail inflation target of 4 per cent for the next five years with an upper tolerance level of 6 percent and lower limit of 2 per cent.
  • Household spending accounts for more than half of India’s GDP.
  • The slowdown in household spending could push back investment growth.


6)   RBI asked banks to maintain additional average daily balance through incremental CRR of what percent?

a. 80
b. 90
c. 100
d. 110
Answer  Explanation 

ANSWER: 100

Explanation:
RBI has asked banks to temporarily maintain additional average daily balance to drain out surplus liquidity with them.

This follows the banking system being flooded with liquidity triggered by heavy inflow of deposits, due to ongoing demonetisation exercise.

CRR or slice of deposits that banks have to maintain with the central bank remains at 4 percent of the deposits.

Surfeit of liquidity is on account of the fact that they altogether parked INR 2,27,242 crore in 3 reverse repo auction conducted by the RBI on Nov 26, 2016.

In a circular to banks, RBI said increase in deposits between Sept 16 and Nov 11, scheduled banks will have to maintain incremental CRR of 100 percent beginning Nov 26.

This measure will absorb a part of the surplus liquidity arising from the return of INR 500 and 1000 bank notes, while leaving adequate liquidity with banks to meet credit needs of numerous sectors.

RBI has observed that with the demonetisation decision, there has been an increase in deposits relative to expansion in bank credit leading to large excess liquidity in the system.

It assessed the magnitude of surplus liquidity with the banking system is expected to rise further in coming weeks.

This surplus liquidity will be partly absorbed by applying incremental CRR.

What is Reverse Repo Window?

Reverse repo is a facility provided by the regulator to deposit excess funds by banks for which they earn interest.


7)   RBI has relaxed prudential norms on what?

a. Income recognition
b. Asset classification
c. Provisions pertaining to advances
d. All of the above
Answer  Explanation 

ANSWER: All of the above

Explanation:
Reserve Bank of India on 21st Nov 2016 relaxed prudential norms in income recognition, asset classification and provisions pertaining to advances. Decision came following the withdrawal of INR 500 and 100 rupee notes.

Taking into consideration the problems being faced by small borrowers in repaying their loan dues, RBI has decided to provide additional 60 days time, provided that the value of the loan or crop loan is less than INR 1 crore.

Term loans, housing loans and agriculture loans whether business or personal with sanctioned amount of INR 1 crore rupees on the books of any bank or NBFC will be eligible for relaxation.

Loans sanctioned by NBFC (MFI), NBFCs, Housing Finance Companies and PACs and by State Cooperative Banks to DCCBs are also eligible for the same.

It also applies to dues payable between Nov 1 2016 and Dec 31 2016.

Dues payable before Nov 1 and after 31 Dc 2016 will be covered by the extant instruction for the respective regulated entity with regard to recognition of NPAs.

Additional time given shall not apply to defer the classification of an existing standard asset as substandard and not for restructuring of loans.

RBI: Apex Bank of India

  • Founded in April 1, 1935 in Kolkata
  • Current Governor: Urjit Patel
  • Reserve: 363 billion USD


8)   The new high security INR 500 note has which of the following features?

a. Bleed Lines
b. Circle with 500 in the right
c. Ashoka Pillar emblem
d. All of the above
Answer  Explanation 

ANSWER: All of the above

Explanation:
The new high-security INR 500 notes have been released to banks for distribution on 14th Nov

  • As per the central bank statement, the new INR 500 notes bear the signature of RBI governor Urijit Patel
  • The note is stone grey coloured and bears year of printing 2016 and the Swach Bharat logo printed on the reverse
  • The new 500 note differs from the earlier in size, theme, colour, location of security features and design elements
  • It has The Red Fort as an image of the Indian heritage site with the Indian flag on the reverse of it
  • The banknote also has other features enabling visually impaired persons to identify the denomination: Intaglio printing of the Mahatma Gandhi portrait, Ashoka Pillar emblem, bleed lines, circle with 500 in the right and the identification mark


9)   How much will replacing INR 500 and 1000 rupee notes cost the RBI?

a. INR 13000 crore
b. INR 12000 crore
c. INR 11000 crore
d. INR 10000 crore
Answer  Explanation 

ANSWER: INR 12000 crore

Explanation:
Replacing INR 500 and 1000 denomination notes will cost RBI INR 12,000 crore based on number of notes in circulation and the cost incurred in printing them.

  • RTI queries show it costs INR 2.50 to print each INR 500 denomination note and INR 3.17 to print an INR 1000 note.
  • This costs the central bank INR 3917 crore to print INR 1567 crore Rs. 500 notes in circulation and INR 2000 crore to print the 632 crore INR 1000 notes in circulation recently.
  • Removing all notes and replacing them with new INR 500 and 2000 notes will cost the apex bank INR 12000 crore therefore.
  • By replacing the INR 1000 notes, the government is doing away with the cheapest note to print in relation to the face value of the note.


10)   RBI has released the Monetary Policy on Oct 4th 2016. By how many basis points has it cut the repo rate?

a. 15
b. 25
c. 35
d. 45
Answer  Explanation 

ANSWER: 25

Explanation:
The Reserve Bank of India on 4th October 2016 cut the repo rate by 25 basis points and also said the key takeaways from the RBI policy were as follows:

  • The RBI indicated international growth has slowed more than anticipated through 2016 so far
  • Brexit, banking stress in Europe, Chinese debt, rising protectionism and lowered confidence in monetary policy were key risks.
  • World trade volume contraction was sharper than anticipated in the first half of 2016, and the outlook was bleak
  • As global markets have shrugged off the Brexit vote, an uneasy calm remains regarding uncertainty about the stance of monetary policy of systematic central banks
  • Outlook for agricultural activity in India is bright
  • First advance estimated of Kharif foodgrain production for 2016-2017 was at a record high
  • Industrial sector was impacted by manufacturing-driven contraction in Q2 of the fiscal following the addition of a sequential deceleration in the gross value added in Q1.
  • Steel and cement production are strong but the output of the core industries as a whole was weighted down by decline in the production of coal, natural gas and crude oil
  • Business expectations as per RBI’s industrial outlook survey remained expansionary in Q2 and Q3.
  • Strong public investment in roads, railways and inland waterways and increased spending from the 7th Pay Commission award will strive to improve industrial outlook
  • Acceleration in the pace of activity in services sector in Q1 appears to have sustained
  • Inflation excluding fuel and food have been around 5 percent mainly with respect to education, medical and personal care services.
  • Household inflation expectations in the Sept 2016 round of RBI survey have risen
  • Input costs in the manufacturing sector including staff costs have risen but corporates lack pricing power to pass costs onto customers
  • Liquidity conditions remained comfortable in Q3, while exports were down but sharp fall in imports have helped contain trade deficit
  • Deficit in remittances and flattening of software earnings may have to be watched
  • Forex reserves stood at record high of USD 372 billion by Sept 30, 2016
  • RBI also cut the key lending repo rate to 6.25 percent as the panel felt inflation levels were low enough to reduce loan rates
  • Six member Monetary Policy Committee headed by governor Urjit Patel has agreed that inflation was unlikely to overshoot the threshold level of 6 percent.
  • A lower repo rate at which banks borrow from the RBI would mean households may expect cheaper bank loans to buy houses and goods such as cars
  • GoI has also announced measures to control food inflation pressures, especially with regard to pulses- measures will control the momentum of food inflation in coming months
  • While Indian economy grew by 7.1% in April to June period (the slowest in 6 quarters) RBI and MPC have expected a revival in coming months boosted by rain and government bonanza for its employees


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