ele ted       s   23.17
            April 1, 2013 to March 31, 2018). The              the RRBs have been amalgamated into
            foreign banks with less than 20 branches           64 only (originally there were 196 such
            have no sub-targets within the overall             banks set up to 1996 when GoI decided
            priority sector lending target of 32 per           not to further them).
            cent. It is known that the RBI in August   10. (b) This happens when there is a fear that
            2011 did set up a committee to re-                 the bank has insufficient funds with it—
            examine the existing classification and            depositors lose confidence in the bank
            suggest revised guidelines with regard to          and start withdrawing their deposits in
            PSL and related issues (chaired by S. M.           the concerned bank. This term has been
            V. Nair). The committee submitted its              used in contemporary journalism recently
            report in February 2012.                           in the wake of the high loss fetched by the
     6. (d) The stock of money in ‘Other deposits’             United Bank of India. Similar situations
            with the RBI is the liquidity which is             were seen in the wake of the sub-prime
            available at its disposal for day-to-day           crisis in the US economy—by now, over
            uses and are not of any use for long-term          300 banks have been closed down in the
            purposes. Accounts in international                economy due to losses.
            agencies include agencies like IMF and     11. (c) This question is based on the situation
            other such bodies.                                 where ‘borrowers benefit out of inflation
     7. (c) In the new monetary aggregate M3 is                while lenders suffer’ (i.e., inflation
                                                               premium). Inflation-indexed bonds
            the ‘broad money’ (like the old one).
                                                               are neutral to the effects of inflation;
            Bankers’ deposit is part of the ‘reserve
                                                               if someone holds such bonds during
            money’. Post Offices’ saving deposits
                                                               inflationary pressures, the interest benefit
            (excluding National Saving Certificates)
                                                               on it does not see any erosion.
            are part of M4 . For ‘other deposits’ see
                                                       12. (d) This question is based on the idea of
            the explanation of the Q. No. 8.
                                                               relationship between ‘inflation’ and ‘real
     8. (a) This is a situation when the import                interest rate’ which borrowers pay on
            (custom) duty applicable on the finished           their borrowings. Components of money
            product is lower than on the raw                   market are tools of borrowing ‘short-
            material (or intermediate product). This           term’ (i.e., working capital) money from
            discourages domestic manufacturers. In             the financial market—thus inflation
            case of India it occurs not solely because         affects them in similar ways.
            of basic custom duty but in some cases as  13. (d) The idea is the same as ‘inflation
            a result of other additional duties.               premium’. Seignorage is a technique by
     9. (b) The share capital of the RRBs are                  which government intends to increase
            jointly held by the GoI, the sponsoring            its tax revenues by issuing fresh currency
            scheduled commercial banks (SCBs)                  notes, which brings in extra cash to the
            and the concerned state governments                government in two ways, one via printed
            in the ratio of 50 percent, 35 percent             currency and the other through increase
            and 15 percent. Since December                     in tax income.
            2012, appointments to the RRBs take        14. (b) RBI avails no autonomy in its
            place through the Institute of Banking             functioning—though the Narasimhan
            Personnel Selection (IBPS). By now,                Committee-I in 1991 has suggested