Functions of RBI MCQ Quiz - Objective Question with Answer for Functions of RBI - Download Free PDF

The correct answer is CD Deshmukh.

Key Points

• CD Deshmukh was the first Indian to serve as the Governor of the Reserve Bank of India (RBI).
• He played a pivotal role in transitioning the RBI from a private shareholders' institution to a state-owned organization in 1949.
• The Reserve Bank of India was nationalized under the Reserve Bank of India (Transfer of Public Ownership) Act, 1948, which came into effect on January 1, 1949.
• Deshmukh's leadership ensured the smooth transfer of ownership while maintaining the institution's stability and public trust.
• He later served as the Finance Minister of India from 1950 to 1956, contributing significantly to the country's economic policies.

Additional Information

• Reserve Bank of India Nationalization:
  • The RBI was established as a private shareholders' institution in 1935, under the Reserve Bank of India Act, 1934.
  • It was nationalized in 1949, making it fully owned by the Government of India.
  • The nationalization marked a critical step in aligning India's central banking system with its planned economic objectives post-independence.
• CD Deshmukh's Contributions:
  • He was instrumental in India's economic planning and policy-making during his tenure as Finance Minister.
  • He introduced measures for rural development and social sector investment, such as the establishment of the Imperial Bank of India (now SBI) as a public institution.
• Role of the RBI Post-Nationalization:
  • The RBI became the principal monetary authority responsible for issuing currency, managing inflation, and regulating banks.
  • It also took on developmental roles, such as promoting financial inclusion and supporting agriculture and industry.
• Significance of Nationalization:
  • Nationalization ensured that the RBI would work in alignment with the government's economic priorities, particularly in areas like poverty alleviation and industrial growth.
  • It also enhanced public confidence in India's financial system.

The Correct answer is Option 4. 

Key Points

• In May 2016, the RBI Act, 1934 was amended to provide a statutory basis for the implementation of the flexible inflation targeting framework (1): The RBI Act was amended to establish the flexible inflation targeting framework. Hence Correct. 
• Under Section 45Z A, the Central Government, in consultation with the RBI, determines the inflation target in terms of the Consumer Price Index (CPI), once in five years (2):  The inflation target is indeed determined in consultation with the RBI and is reviewed every five years. Hence Correct. 
• On March 31, 2021, the Central Government retained the inflation target of 6 percent with the tolerance band of ± 2 percent for the next 5-year period - April 1, 2021 to March 31, 2026 (3):  The government retained the inflation target of 6% with a tolerance band of ± 2% for the specified period. Hence Correct. 
• All statements regarding inflation targeting by the Reserve Bank of India are correct. Thus, the correct answer is Option 4

The Correct answer is Option 4. 

Key Points

• The withdrawal of ₹2000 currency notes is  related to any "Compound Note Policy." The Reserve Bank of India (RBI) withdrew these notes to ensure the public has access to other denominations that are more commonly used.
• The RBI’s decision to withdraw ₹2000 notes not aimed to provide the public with clean and high-quality currency notes of other denominations. It aligns with the RBI’s Clean Note Policy.
•  ₹2000 currency notes were introduced in November 2016, not in 2015, as part of the government's demonetization exercise.
• he RBI stopped printing ₹2000 notes in 2018-19 as their objective was largely met, and they were not required for circulation.
• Hence Option 4 is correct. 

Additional Information ₹2000 Denomination Banknotes

• The ₹2000 denomination banknote was introduced in November 2016 under Section 24(1) of Reserve Bank of India Act, 1934 (RBI Act)
• Primarily with the objective of meeting the currency requirement of the economy in an expeditious manner after withdrawal of the legal tender status of all ₹500 and ₹1000 banknotes in circulation at that time. With fulfilment of that objective and availability of banknotes in other denominations in adequate quantities,
• Printing of ₹2000 banknote was stopped in 2018-19. A majority of the ₹2000 banknotes was issued prior to March 2017 and are at the end of their estimated life-span of 4-5 years. 

The Correct answer is Option 4. 

Key Points

• The withdrawal of ₹2000 currency notes is  related to any "Compound Note Policy." The Reserve Bank of India (RBI) withdrew these notes to ensure the public has access to other denominations that are more commonly used.
• The RBI’s decision to withdraw ₹2000 notes not aimed to provide the public with clean and high-quality currency notes of other denominations. It aligns with the RBI’s Clean Note Policy.
•  ₹2000 currency notes were introduced in November 2016, not in 2015, as part of the government's demonetization exercise.
• he RBI stopped printing ₹2000 notes in 2018-19 as their objective was largely met, and they were not required for circulation.
• Hence Option 4 is correct. 

Additional Information ₹2000 Denomination Banknotes

• The ₹2000 denomination banknote was introduced in November 2016 under Section 24(1) of Reserve Bank of India Act, 1934 (RBI Act)
• Primarily with the objective of meeting the currency requirement of the economy in an expeditious manner after withdrawal of the legal tender status of all ₹500 and ₹1000 banknotes in circulation at that time. With fulfilment of that objective and availability of banknotes in other denominations in adequate quantities,
• Printing of ₹2000 banknote was stopped in 2018-19. A majority of the ₹2000 banknotes was issued prior to March 2017 and are at the end of their estimated life-span of 4-5 years. 

The Correct answer is Option 4. 

Key Points

• In May 2016, the RBI Act, 1934 was amended to provide a statutory basis for the implementation of the flexible inflation targeting framework (1): The RBI Act was amended to establish the flexible inflation targeting framework. Hence Correct. 
• Under Section 45Z A, the Central Government, in consultation with the RBI, determines the inflation target in terms of the Consumer Price Index (CPI), once in five years (2):  The inflation target is indeed determined in consultation with the RBI and is reviewed every five years. Hence Correct. 
• On March 31, 2021, the Central Government retained the inflation target of 6 percent with the tolerance band of ± 2 percent for the next 5-year period - April 1, 2021 to March 31, 2026 (3):  The government retained the inflation target of 6% with a tolerance band of ± 2% for the specified period. Hence Correct. 
• All statements regarding inflation targeting by the Reserve Bank of India are correct. Thus, the correct answer is Option 4

The Correct answer is Option 4. 

Key Points

• The withdrawal of ₹2000 currency notes is  related to any "Compound Note Policy." The Reserve Bank of India (RBI) withdrew these notes to ensure the public has access to other denominations that are more commonly used.
• The RBI’s decision to withdraw ₹2000 notes not aimed to provide the public with clean and high-quality currency notes of other denominations. It aligns with the RBI’s Clean Note Policy.
•  ₹2000 currency notes were introduced in November 2016, not in 2015, as part of the government's demonetization exercise.
• he RBI stopped printing ₹2000 notes in 2018-19 as their objective was largely met, and they were not required for circulation.
• Hence Option 4 is correct. 

Additional Information ₹2000 Denomination Banknotes

• The ₹2000 denomination banknote was introduced in November 2016 under Section 24(1) of Reserve Bank of India Act, 1934 (RBI Act)
• Primarily with the objective of meeting the currency requirement of the economy in an expeditious manner after withdrawal of the legal tender status of all ₹500 and ₹1000 banknotes in circulation at that time. With fulfilment of that objective and availability of banknotes in other denominations in adequate quantities,
• Printing of ₹2000 banknote was stopped in 2018-19. A majority of the ₹2000 banknotes was issued prior to March 2017 and are at the end of their estimated life-span of 4-5 years. 

The Correct answer is Option 4. 

Key Points

• In May 2016, the RBI Act, 1934 was amended to provide a statutory basis for the implementation of the flexible inflation targeting framework (1): The RBI Act was amended to establish the flexible inflation targeting framework. Hence Correct. 
• Under Section 45Z A, the Central Government, in consultation with the RBI, determines the inflation target in terms of the Consumer Price Index (CPI), once in five years (2):  The inflation target is indeed determined in consultation with the RBI and is reviewed every five years. Hence Correct. 
• On March 31, 2021, the Central Government retained the inflation target of 6 percent with the tolerance band of ± 2 percent for the next 5-year period - April 1, 2021 to March 31, 2026 (3):  The government retained the inflation target of 6% with a tolerance band of ± 2% for the specified period. Hence Correct. 
• All statements regarding inflation targeting by the Reserve Bank of India are correct. Thus, the correct answer is Option 4