RBI - General awareness questions on current affairs

1)   Who has been appointed as director on the RBI central board?

a. Ashok Gulati
b. Rajiv Kumar
c. Manish Sabharwal
d. All of the above
Answer  Explanation 

ANSWER: All of the above

Explanation:
GoI has appointed three directors on the all-powerful central board of RBI, which include two noted economists Ashok Gulati and Rajiv Kumar, for four years.

Besides Gulati and Kumar, the Appointments Committee of the Cabinet (ACC) has appointed Manish Sabharwal as a director.

Further, the ACC has also approved the proposal of the Department of Financial Services for appointment of three members on the local board of RBI.

Prasanna Kumar Mohanty (Southern Local Board), Vallabh Roopchand Bhanshali (Western) and Sunil Mitra (Eastern) have been appointed for four years.

The last board-level appointment by the government was made when it elevated N S Vishwanathan to the post of deputy governor in June.

Prior to that, in March, the government had nominated three non-official directors - Natarajan Chandrasekaran, Bharat Narotam Doshi and Sudhir Mankad - on the central board of the bank.

Manish Sabharwal is a businessman and entrepreneur, who is currently the chairman of Teamlease, which he co-founded.

Prior to this, he also co-founded India Life, a human resource outsourcing company.

Mr. Kumar is a senior fellow at the Centre for Policy Research and has authored several books on India’s economy.

He is also currently chancellor of the Gokhale Institute of Economics and Politics in Pune.

He is also the founding director of Pahle India Foundation, a non-profit research organisation.

Mr. Gulati is currently the Infosys Chair Professor for Agriculture at the Indian Council for Research on International Economic Relations (ICRIER).

Prior to that, he was the chairman of the Commission for Agricultural Costs and Prices (CACP), the body responsible for recommending Minimum Support Prices (MSPs) of agri-commodities to the government.

In addition to this, the Cabinet also approved the proposal by the Department of Financial Services for appointment of three members on the local board of the RBI.

RBI Board of Directors: Know More

  • The RBI's affairs are governed by the central board of directors.
  • The board is appointed by the government.
  • The central board comprises the governor, deputy governors, 10 directors from various fields, two government officials and one each from the four local boards.
  • As per the RBI website, besides the governor and deputy governors, there are six directors on the central board.
  • These are Nachiket Mor, Natarajan Chandrasekaran, Bharat Narotam Doshi, Sudhir Mankad, Shaktikanta Das and Anjuly Chib Duggal.


2)   In Monetary Review on 8th Feb 2017, RBI has kept repo rate _________

a. Unchanged
b. Changed to 7.25%
c. Changed to 8.25%
d. None of the above
Answer  Explanation 

ANSWER: Unchanged

Explanation:
The Reserve Bank of India (RBI) has kept the repo rate unchanged at 6.25% in its monetary policy review on 8th Feb 2017.

It was citing inflation concerns after the first quarter of the next financial year, once the base effect vanishes.

The RBI said all the six members of the monetary policy committee voted in favour of the decision.

“ Favourable base effects and lagged effects of demand compression may mute headline inflation in Q1 of 2017-18,” the central bank said in a statement.

“Thereafter, it is expected to pick up momentum, especially as growth picks up and the output gap narrows. Moreover, base effects will reverse and turn adverse during Q3 and Q4 of 2017-18,” the RBI added.

Now, the RBI has projected inflation in the range of 4.0 to 4.5% in the first half of the financial year and in the range of 4.5 to 5.0% in the second half.

The central bank cited ‘three significant upside risks’ that impart some uncertainty to the baseline inflation path -

  • The hardening profile of international crude prices;
  • Volatility in the exchange rate on account of global financial market developments, and the
  • Fuller effects of the house rent allowances under the 7th Central Pay Commission (CPC) award.
At the same time, the RBI lauded the Central government for its effort in maintaining fiscal discipline that could have a favourable impact on inflation.

Monetary Policy Review
  • Repo rate under the liquidity adjustment facility (LAF): Unchanged at 6.25 percent.
  • Reverse repo rate under the LAF: Unchanged at 5.75 per cent.
  • Marginal standing facility (MSF): Unchanged at 6.75 per cent.
  • Bank Rate: Unchanged at 6.75 per cent.
  • Reserve Ratios Cash Reserve Ratio (CRR) of scheduled banks: Unchanged at 4.0 per cent of net demand and time liability (NDTL).
  • Statutory Liquidity Ratio (SLR): Unchanged 20.75 per cent.


3)   RBI has restricted Indian entities from making investments in non cooperative countries and territories as per _________

a. FATF
b. FADF
c. FACF
d. None of the above
Answer  Explanation 

ANSWER: FATF

Explanation:
Reserve Bank has prohibited Indian entities from making direct investments in any entity located in ‘non co-operative countries and territories.’

This is as identified by the inter-governmental body FATF.

The Financial Action Task Force (FATF) currently comprises two regional organisations and 35 member jurisdictions, including India, US, UK, China and the European Commission.

FATF was established in 1989.

Its objectives are to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system.

FATF: Know More

  • Abbreviation: FATF
  • Formation: 1989
  • Type: Intergovernmental organization
  • Purpose: Combat money laundering and terrorism financing
  • Headquarters: Paris, France
  • Region served: Worldwide
  • Membership: 36
  • Official language: English, French
  • President: Roger Wilkins


4)   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.


5)   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.


6)   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.


7)   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.


8)   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.


9)   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.


10)   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


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