RBI Monetary Policy Questions Asked in Bank and Other Exams

The Reserve Bank of India’s (RBI) monetary policy is a cornerstone of the Indian financial system, shaping the nation’s economic landscape. As it has much importance, RBI Monetary Policy-related questions are frequently asked in banking and financial sector exams, such as SBI Clerk, IBPS PO, RBI Grade B, NABARD, and others as well as in other competitive exams. RBI Monetary Policy not only tests aspirants’ knowledge of economic and banking concepts but also their awareness of current financial events. Through the given article, we have compiled the RBI Monetary Policy Questions Asked in Bank and Other Exams.

Why Focus on RBI Monetary Policy?

The RBI’s monetary policy tools, such as repo rates and CRR, directly influence lending rates, inflation, and liquidity in the market. These concepts are tested to assess candidates’ understanding of economic policies, financial systems, and their implications.

Types of Questions Asked Related RBI Monetary Policy

Questions on RBI monetary policy generally fall under the following categories:

Monetary Policy Tools

• Quantitative Tools: Repo Rate, Reverse Repo Rate, CRR, SLR, etc.
• Qualitative Tools: Moral Suasion, Credit Rationing, etc.

Frameworks and Objectives

• Inflation Targeting (Flexible Inflation Targeting Framework)
• Monetary Policy Committee (MPC) and its functioning

RBI Regulations and Operations

• Open Market Operations (OMO)
• Marginal Standing Facility (MSF)
• Liquidity Adjustment Facility (LAF)

Recent Updates

• Changes in repo rates or inflation targets
• Key announcements in monetary policy reviews

RBI Monetary Policy Questions Asked in Bank and Other Exams

Q1. What is the Repo Rate?[IBPS Clerk 2022]

a) The rate at which RBI borrows money from banks
b) The rate at which RBI lends money to banks without security
c) The rate at which RBI lends money to banks against security
d) The interest rate on inter-bank borrowing

Q2. What is the inflation target under India’s Flexible Inflation Targeting Framework?[RBI Grade B 2021]

a) 2%
b) 3% ± 1%
c) 4% ± 2%
d) 5% ± 1%

Q3. Which of these is NOT a quantitative tool of monetary policy?[SBI PO 2020]

a) Cash Reserve Ratio (CRR)
b) Statutory Liquidity Ratio (SLR)
c) Open Market Operations (OMO)
d) Moral Suasion

Q4. When was the Monetary Policy Committee (MPC) formed?[NABARD Grade A 2022]

a) 2014
b) 2015
c) 2016
d) 2017

Q5. What is the purpose of the Reverse Repo Rate?[IBPS SO 2020]

a) To increase liquidity in the market
b) To absorb excess liquidity from the market
c) To stabilize currency exchange rates
d) To boost credit growth in the economy

Q6. Who chairs the Monetary Policy Committee (MPC)?[IBPS RRB PO 2021]

a) Finance Minister
b) RBI Governor
c) Chief Economic Advisor
d) Secretary of Finance

Q7. What is the maximum limit of the Marginal Standing Facility (MSF)?[IBPS Clerk 2020]

a) 1% of Net Demand and Time Liabilities (NDTL)
b) 2% of NDTL
c) 4% of NDTL
d) No fixed limit

Q8. What does “Open Market Operations” (OMO) mean?[SBI Clerk 2021]

a) Selling foreign currency reserves
b) Buying and selling of government securities by RBI
c) Issuance of new currency notes by RBI
d) Borrowing by commercial banks from the RBI

Q9. Which committee recommended the adoption of inflation targeting in India?[RBI Grade B 2019]

a) Urjit Patel Committee
b) Rangarajan Committee
c) Nachiket Mor Committee
d) Tarapore Committee

Q10. What is the tenure of external members of the Monetary Policy Committee (MPC)?[NABARD Grade A 2020]

a) 2 years
b) 3 years
c) 4 years
d) 5 years

Q11. What is the current Cash Reserve Ratio (CRR) in India? (As per the year of the exam)[RBI Assistant 2021]

a) 3%
b) 4%
c) 5%
d) 6%

Q12. What happens when RBI increases the Repo Rate?[IBPS PO 2021]

a) Liquidity increases in the economy
b) Liquidity decreases in the economy
c) Lending rates decrease
d) Inflation increases

Q13. Which of these is a qualitative tool of monetary policy?[SBI PO 2019]

a) Repo Rate
b) Credit Rationing
c) Cash Reserve Ratio
d) Open Market Operations

Q14. What does Bank Rate refer to?[IBPS Clerk 2020]

a) The rate at which banks lend to customers
b) The rate at which RBI lends to banks for long-term funds
c) The rate at which RBI borrows from banks
d) None of the above

Q15. What is the tenure of monetary policy reviews conducted by RBI?[SBI Clerk 2022]

a) Monthly
b) Quarterly
c) Bi-Monthly
d) Annually

Q16. Which of the following is the primary objective of monetary policy in India?[IBPS PO 2019]

a) Price stability

b) Economic growth

c) Full employment

d) Balance of payments

Q17. What is the name of the committee that recommends the monetary policy framework to the Reserve Bank of India (RBI)?[SSC CGL 2018]

a) Monetary Policy Committee (MPC)

b) Financial Stability and Development Council (FSDC)

c) Reserve Bank of India (RBI) Board

d) National Institute of Public Finance and Policy (NIPFP)

Q18. Which of the following tools is used by the RBI to control inflation?[RBI Grade B 2017] 

a) Open Market Operations (OMO)

b) Cash Reserve Ratio (CRR)

c) Statutory Liquidity Ratio (SLR)

d) Repo Rate

Q19. What is the name of the rate at which the RBI lends money to commercial banks?[IBPS Clerk 2016]

a) Repo Rate

b) Reverse Repo Rate

c) Bank Rate

d) Marginal Standing Facility (MSF) Rate

Q20. Which of the following is a consequence of a tight monetary policy?[SSC CHSL 2015] 

a) Increase in aggregate demand

b) Decrease in inflation

c) Increase in unemployment

d) Appreciation of the currency

Q21. What is the name of the committee that was set up by the RBI to review the monetary policy framework?[RBI Assistant 2014] 

a) Urjit Patel Committee

b) Raghuram Rajan Committee

c) Y.V. Reddy Committee

d) Bimal Jalan Committee

Q22. Which of the following is a tool of monetary policy used by the RBI to regulate the money supply?[IBPS PO 2013] 

a) Open Market Operations (OMO)

b) Cash Reserve Ratio (CRR)

c) Statutory Liquidity Ratio (SLR)

d) All of the above

Q23. What is the name of the rate at which commercial banks borrow money from the RBI?[SSC CGL 2012] 

a) Repo Rate

b) Reverse Repo Rate

c) Bank Rate

d) Marginal Standing Facility (MSF) Rate

Q24. Which of the following is a consequence of an expansionary monetary policy?[RBI Grade B 2011] 

a) Decrease in aggregate demand

b) Increase in inflation

c) Decrease in unemployment

d) Depreciation of the currency