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The Central Bank acts as banker to both central and state government. Explanation:- Banker to the Government:- The Reserve Bank of India acts as a banker, agent, and financial advisor to the Central Government and all the State Governments. As…
Components of Legal reserve ratio are Statutory Liquidity Ratio and Cash Reserve Ratio. Explanation:- According to the Legal Reserve requirement, commercial banks are obliged to maintain reserves. It is a very quick and direct method for controlling the credit-creating power…
One rupee note and all coins are issued by the Ministry of Finance. Explanation:- Under Section 22 of the Reserve Bank of India Act, RBI has the sole right to issue currency notes of various denominations except one rupee notes…
Qualitative instruments of monetary policy affect the direction of money supply in the economy. Explanation:- Qualitative controls are designed to regulate the direction of credit.
To decrease money supply in the economy, reverse repo rate should be increased. Explanation:- Reverse Repo Rate:- it is the rate of interest at which commercial banks can deposit their surplus funds with the Central Bank, for a relatively shorter…
Statutory Liquidity Ratio refers to minimum percentage of net demand and time liabilities which commercial banks are required to maintain with themselves. Explanation:- According to Legal Reserve requirements, commercial banks are obliged to maintain reserves. in the form of CRR…
Monetary Policy is the policy adopted by the Central Bank of an economy in the direction of credit control or money supply. Explanation:- The Reserve Bank of India (RBI) is empowered to regulate the money supply in the economy through…
Repo rate is applicable to Short-term lending, while bank rate is applicable to long-term lending. Explanation:- Repo Rate:- The repo rate is the rate at which the central bank of a country lends money to commercial banks to meet their…
Money Multiplier = 1/LRR LRR = Legal Reserve Ratio Explanation:- Money Multiplier is the process by which commercial banks create credit, based upon the reserve ratio and initial deposits. It is calculated as:- Money Multiplier = 1/LLR For example: LRR…
Central bank has sole monopoly in issue of currency. Explanation:- One of the functions of the Central Bank is: Current Authority (or Bank of Issue):- The Central Bank has the sole authority for the issue of currency in the country.…