Question

Which of the following are the instruments of Credit Control in the hands of the RBI?
A. Lowering or raising the discount and interest rates
B. Raising the minimum support price of the major agro products
C. Lowering or raising the minimum cash reserves maintained by the commercial banks

• A. Only (A)
• B. Only (B)
• C. Only (C)
• D. Both (A) and (C) only

Answer 1

Answer: (D)

Both (A) and (C) only

RBI stands for Reserve Bank of India. It is the central bank of India. It is the apex bank and has the sole authority to issue and manage currency in India. Only RBI can issue currency on behalf of the Indian Government. It also manages the money supply in the economy by exercising monetary and fiscal policy. Following are the instruments of Credit control in the hands of the RBI :A. Lowering or raising the discount and interest rates: During deflation, RBI raises interest and discount rates. Whereas, during inflation, RBI lowers interest rates and discount rates.
B. Lowering or raising the minimum cash reserves maintained by the commercial banks:During deflation, RBI lowers minimum cash reserves limit. Whereas, during inflation, RBI raises the minimum cash reserves.