In 2013, UPSC walla asked a very chillar question from this topic. Anyways, Under this LAF “adda”, RBI has two tools: Problem with running a “adda/gambling-den” = sometimes client drinks too much desi liquor and passes out on floor. RBI doesn’t like headache. Has it really hurt India’s growth story by depriving cheap loans to MSME sectors? Watch THE HINDU editorial decode daily at 10 am by G.Rajput –. In this case, RBI should RAISE the reserve ratios. RBI’s not doing it as a “Banker” to those banks. 217 : IEnggS-2021 Let’s observe with a graph: how RBI fought inflation/deflation in recent times using Repo rate as the “main-weapon” of monetary policy. But still if doubt persists in the mind (e.g whether Statement 3 is right or not) then it’s always safe to skip and avoid negative marking. Rajan has no control over them. Suggested additional Legal reforms for loan recovery. UPSC Notes | EduRev is made by best teachers of UPSC. You should either change your study method or change the game- try for some. Because bank can used it to expand loanable credit. So you mark the question number (say 45), at the back of your question paper. (Batch: PCB2) Mrunal’s Economy Pillar#1A-2: Money Supply & RBI’s Monetary Policy → Page 32 Pillar1A2: 螺螺 Money Supply (M0-M4) & Monetary Policy- CRR, SLR, Repo Previous Years' official UPSC MCQs also given in this handout. Because the facility decision I guess lies with RBI whether to sign a Reverse Repurchase agreement or not. And how much interest rate did she pay on this “loan”? He pledges his company’s shares worth Rs.100 crores as collateral. Result? The legal backing for monetary policy by the Bank derives from the various statutes of the bank such as the CBN Act of 1958 as amended in CBN Decree No. Focus on first statement “Purchase of government securities from public by central bank”: will it increase money supply in the system? So, bank would have to forget about most of those 18 crores given in PSL loans. First find a statement that is definitely right or definitely wrong and eliminate choices accordingly. Imagine you’re a money lender. I get to understand the economy for the first time since I started my preparation…. ), Direct in nature. Lack of financial inclusion. But what if you’ve only 2 crore rupees, and you still want to make Rs.1 croer profit in a year? RBI lends funds to commercial banks in the times of need. RBI’s main job is to control Money supply in this game, and thereby fight inflation and deflation. Therefore, people switched to money system. (and under MSF window, Rajan will demand 1% higher than Repo as one type of ‘punishment’ for pledging SLR securities.). RBI started this in 2000. Two types. Thanks a lot Sir :). In the previous sessions, we learned about the quantitative tools of monetary policy, which decide the ‘volume’ of credit in an economy. By the way, What about Statement #2: Deposit of currency in commercial banks by the public. He starts cutting down unnecessary expenditure (e.g. Observe the effect: By the way, PSL is counted on annual basis while SLR, CRR counted on fortnight basis so above table is technically incorrect but I’ve plugged in those numbers only for the sake of explanation. Thus, increase in Bank rate reflects tightening of RBI monetary policy. this prevents speculations/ hoarding of commodities using money borrowed from banks. This document is highly rated by UPSC students and has been viewed 708 times. Gradually, we moved to the Base Rate system. Which of the following contains correct set of qualitative instruments of monetary policy? Hence #3 is wrong. In one of the reputed book on Banking and finance, author Narayan Nadar claimed taxation can affect money supply. 196 : Prelim-2021 Is it a good thing or is there any other way of interpreting this? 77 : IFS(M)-2020 Section 12 Sub-sections (1) to (5), CBN Act of 2007 (Ammended) Prologue: from now on, all Powerpoint available at https://mrunal.org/powerpoint, Youtube Link: https://youtu.be/u8QKLC2cReI, Youtube Link: https://youtu.be/HLyyLG1NuGc, Youtube Link: https://youtu.be/CtbrBaVwTzM. Agreed that prices of onion, sugar, pulses and food are subject to vagaries of monsoon and black marketeering. The lesson will be delivered in Hindi and the notes for the same will be provided in English. Does it mean Repo rate system is bogus and ineffective? Q. RBI Acts as banker’s bank. Lending rate methods in India: benchmark prime lending rate. What have we learned so far? Thanks for A2A. Mrunal Patel is nowadays very popular among civil service aspirants in India. 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