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Question
What is meant by Legal Reserve Ratio?
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Solution
- Legal Reserve Ratio (LRR) is the minimum ratio of deposits, legally required to be kept as cash reserves.
- The LRR is fixed by the Central Bank.
RELATED QUESTIONS
Define bank rate.
Which of the following is a selective/qualitative method of credit control?
Define qualitative credit control policy of the RBI.
Explain how credit rationing helps to control credit in an economy.
______ is a quantitative method of credit control.
Which of the following is not a quantitative method of credit control?
In order to encourage investment in the economy, the central bank may ______.
Match the following and select the correct option:
| Column A | Column B | ||
| (i) | A rate of interest at which the central bank (RBI) lends money to member commercial banks to meet they long term needs. | A. | Cash Reserve Ratio |
| (ii) | A rate of interest at which RBI lends money to commercial banks to meet their short term needs. | B. | Statutory liquidity ratio |
| (iii) | A minimum percentage of total deposits kept by banks with the Central Bank. | C. | Repo rate |
| (iv) | A minimum percentage of total deposits to be kept by banks inform of liquid assets with themselves. | D. | Bank rate |
Read the following statements - Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Bank rate is a quantitative instrument of monetary policy.
Reason (R): During inflation, RBI reduces the bank rate.
Give any two reasons as to why a country needs a central bank.
Differentiate between quantitative and qualitative methods of credit control.
Briefly explain the following credit control methods adopted by the Central Bank.
Moral persuasion
Central bank is the lender of the last resort. Explain.
The Central Bank is the apex monetary institution of the country. Explain its role of a custodian of foreign exchange reserves.
Explain the following function of the central bank of a country.
Fixation of margin requirement on secured loans.
Which of the following statements are correct and which are incorrect? Give reasons.
- Central bank is a currency authority.
- Bank rate is a qualitative method of credit control.
- Quantitative methods regulate direction of credit.
- Bank rate is the rate at which commercial banks give loans to the public.
- Central bank should sell government securities when credit is to be expanded.
Identify the following Credit Control measure undertaken by the Central Bank during inflation.
The Central Bank sells government approved securities to the public.
Which are qualitative methods of credit control?
Give an example of margin requirements.
