2024 · Q101
Consider the following statements regarding instruments of Monetary Policy:
- 1The Central Bank can increase the money supply by increasing the bank rate
- 2The Central Bank can increase the money supply by purchasing securities from the public
- 3The Central Bank can decrease the money supply by increasing the cash reserve ratio Which of the statements given above is/are correct?
indian-polity-economybanking-finance
- A2 only
- B2 and 3 only
- C1 and 3 only
- D1, 2 and 3
Explanation
The Reserve Bank of India was established on 1 April 1935 under the Reserve Bank of India Act, 1934, and was nationalised in 1949 — so statements 1 and 2 are correct. Statement 3 is NOT correct: the RBI does not directly lend to the general public; its functions include note issue, banker to the government and banker to banks, but retail lending is done by commercial banks. With only statements 1 and 2 correct, the answer is B.