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