RBI - Banking awareness questions on current affairs

ANSWER: Banking Ombudsman Scheme

Explanation:
Banking Ombudsman Scheme is a mechanism created by the RBI to address the complaints raised by bank customers.

It is run by the RBI directly to ensure customer protection in the banking industry.

The Banking Ombudsman Scheme was introduced under Section 35 A of the Banking Regulation Act, 1949 by RBI with effect from 1995.

The present Ombudsman scheme was introduced in 2006.

When a customer can approach the Ombudsman?

A customer can file a complaint before the Banking Ombudsman if the bank doesn’t provide a satisfactory reply to the customer within a period of one month or the bank rejects the complaint, or if the complainant is not satisfied with the reply by the bank.

ANSWER: IDBI

Explanation:
IDBI is NOT a subsidiary of RBI.

RBI has four subsidiaries viz. -

• Deposit Insurance and Credit Guarantee Corporation (DICGC)
• National Housing Bank (NHB)
• Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL)
• National Bank for Agriculture and Rural Development (NABARD)

ANSWER: All the above

Explanation:
The Reserve Bank of India, as the central bank of the country, functions mainly as -

• Issuer of Currency Notes
• Banker to other Banks
• Banker to The Government
• Exchange Rate Management
• Controller of Credit
• Supervisory Function

ANSWER: 4

Explanation:
The Reserve Bank of India (RBI) is India's central banking institution, which controls the monetary policy of the Indian rupee.

The general superintendence and direction of the RBI is entrusted with the 21-members -

• Central Board of Directors
• The Governor
• 4 Deputy Governors
• 2 Finance Ministry representatives
• 10 government-nominated directors to represent important elements from India's economy
• 4 directors to represent local boards headquartered at Mumbai, Kolkata, Chennai and New Delhi.

Each of these local boards consists of 5 members who represent regional interests, and the interests of co-operative and indigenous banks.

RBI - Reserve Bank of India

Founded : April 1, 1935
Headquarter : Mumbai, Maharashtra
Current Governor : Urjit Patel
Deputy Governors - Harun Rashid Khan, R. Gandhi, S S Mundra, Viral Acharya

ANSWER: OMO

Explanation:
An open market operation is an instrument of monetary policy which involves buying or selling of government securities from or to the public and banks.

The RBI sells government securities to control the flow of credit and buys government securities to increase credit flow.

Open market operation makes bank rate policy effective and maintains stability in government securities market.

ANSWER: Repo Rate

Explanation:
Repo (Repurchase) rate also known as the benchmark interest rate is the rate at which the RBI lends money to the banks for a short term.

When the repo rate increases, borrowing from RBI becomes more expensive.

If RBI wants to make it more expensive for the banks to borrow money, it increases the repo rate similarly, if it wants to make it cheaper for banks to borrow money it reduces the repo rate.

Reverse Repo rate is the short-term borrowing rate at which RBI borrows money from banks.

The Reserve bank uses this tool when it feels there is too much money floating in the banking system.

An increase in the reverse repo rate means that the banks will get a higher rate of interest from RBI.

Thus, banks prefer to lend their money to RBI which is always safe instead of lending it others (people, companies etc.) which is always risky.

Repo Rate signifies the rate at which liquidity is injected in the banking system by RBI, whereas Reverse Repo rate signifies the rate at which the central bank absorbs liquidity from the banks.

ANSWER: Deepak Mohanty

Explanation:
Deepak Mohanty is an economist at India's central bank, the Reserve Bank of India (RBI).

He holds the post of Executive Director at the head office of RBI in Mumbai.

The areas supervised by him are monetary policy, economic research and statistics.

He has also worked in various positions in economic research and monetary policy departments of the RBI.

ANSWER: MSF

Explanation:
Marginal Standing Facility (MSF) rate refers to the rate at which the banks can borrow funds overnight from RBI against government securities.

MSF is a very short term borrowing scheme for scheduled commercial banks. Banks may borrow funds through MSF during severe cash shortage or acute shortage of liquidity.

• The RBI had introduced the marginal standing facility (MSF) in its Monetary Policy (2011-12).
• MSF came into effect on from May 9, 2011.
• Banks used the facility for the first time in June 2011 and borrowed Rs.1 billion via the MSF.

ANSWER: Cash Reserve Raio

Explanation:
Cash Reserve Ratio is a certain percentage of bank deposits which banks are required to keep with RBI in the form of reserves or balances.

Higher the CRR with the RBI, lower will be the liquidity in the system and vice versa.

RBI is empowered to vary CRR between 15 percent and 3 percent.

As of 4 October 2016, the CRR is 4.00 percent.

ANSWER: More liquidity in the market

Explanation:
Market liquidity is a market's ability to facilitate an asset being bought or sold quickly without having to drastically change its price i.e. stable market.

Bank rate is the interest rate at which banks borrows loan from RBI.

RBI reduces the bank rate when supply of the money is low in the country.

Now banks are getting loans at cheaper rate of interest, so banks will start giving loans at lower interest rates, supply of the money will go up in the country.

Purchasing power of individual will increase, in result demand for the goods will increase, supply will meet the demand.

Reducing Bank rate is one of the Quantitative measure in Monetary policy.