Question 1

What is the Statutory Liquidity Ratio (SLR) in the context of RBI's monetary policy?

Accepted Answer

SLR is the percentage of deposits that commercial banks must maintain in the form of liquid assets (government securities, cash, etc.). It is a tool used by the RBI to control liquidity in the banking system.

Question 2

Which of the following is the primary objective of Monetary Policy in India?

Accepted Answer

The primary objective of monetary policy, as per the RBI Act, is to maintain price stability while keeping in mind the objective of growth. The RBI uses tools like repo rate, reverse repo rate, and CRR to regulate money supply and inflation.

Question 3

Which of the following best describes Fiscal Deficit in a government budget?

Accepted Answer

Fiscal deficit is the difference between total government expenditure and total government revenue (excluding borrowing). It indicates how much the government needs to borrow to meet its spending obligations.

Question 4

The Pradhan Mantri Mudra Yojana (PMMY) scheme is primarily designed to support which sector?

Accepted Answer

PM Mudra Yojana, launched in April 2015, provides collateral-free loans to micro, small, and medium enterprises (MSMEs) and non-farm small businesses. It is administered by the Ministry of Micro, Small and Medium Enterprises.

Question 5

Which of the following best describes Fiscal Deficit in the context of Union Budget?

Accepted Answer

Fiscal Deficit is the difference between total government expenditure and total government revenue (excluding borrowing). It represents the amount the government needs to borrow to meet its spending obligations.

Question 6

The Pradhan Mantri Mudra Yojana (PMMY) scheme primarily aims to provide loans to which category of borrowers?

Accepted Answer

PM Mudra Yojana, launched in April 2015, provides collateral-free loans up to ₹10 lakh to micro, small, and medium enterprises (MSMEs) and self-employed individuals who lack access to formal credit. It is administered by the Ministry of Finance.

Question 7

Which RBI monetary policy tool involves the central bank lending money to commercial banks against government securities at a predetermined rate?

Accepted Answer

The Repo Rate (Repurchase Rate) is the rate at which the RBI lends money to commercial banks against the collateral of government securities. It is a key tool for controlling money supply and inflation.

Question 8

Revenue Deficit in a government budget occurs when:

Accepted Answer

Revenue Deficit is the difference between revenue expenditure and revenue receipts. It indicates that the government is spending more on non-productive items (salaries, interest, subsidies) than it is earning from taxes and other revenue sources.

Question 9

Which of the following best describes the primary objective of the Reverse Repo Rate in India's monetary policy framework?

Accepted Answer

The Reverse Repo Rate is the rate at which the RBI borrows money from commercial banks. It is used as a tool to absorb excess liquidity from the banking system and control inflation. When the RBI increases the reverse repo rate, it incentivizes banks to park their surplus funds with the RBI rather than lend to the economy, thereby reducing money supply.

Question 10

Under the Monetary Policy Framework, the RBI's Statutory Liquidity Ratio (SLR) requirement mandates that commercial banks maintain a minimum percentage of their Net Demand and Time Liabilities (NDTL) in specified liquid assets. What is the current SLR requirement as of 2024?

Accepted Answer

As of 2024, the Statutory Liquidity Ratio (SLR) requirement is 18% of NDTL. This means commercial banks must hold at least 18% of their demand and time liabilities in the form of liquid assets such as government securities, cash, and gold.

Question 11

The difference between Revenue Deficit and Fiscal Deficit in a government budget is best described as which of the following?

Accepted Answer

Revenue Deficit = Revenue Expenditure minus Revenue Receipts. Fiscal Deficit = Total Expenditure minus Total Receipts (excluding borrowing). The key difference is that Fiscal Deficit includes capital expenditure (investment), while Revenue Deficit does not. A positive Revenue Deficit indicates the government is borrowing even for revenue (non-productive) spending.

Question 12

In the context of India's monetary policy framework, if the RBI increases the Cash Reserve Ratio (CRR) by 50 basis points, which of the following will be the most direct and immediate consequence on the banking system?

Accepted Answer

An increase in CRR reduces the amount of money banks can lend to the public, as they must hold more cash reserves with the RBI. This is a contractionary monetary policy tool used to control inflation by reducing money supply in the economy.

Question 13

As per the Union Budget 2024-25, what is the primary objective of the Fiscal Deficit target announced by the Government of India?

Accepted Answer

The Union Budget 2024-25 set a fiscal deficit target of 4.9% of GDP for FY 2024-25, with a medium-term goal of reducing it to 4.5% by FY 2025-26. This reflects the government's commitment to fiscal consolidation while maintaining growth.

Question 14

Which of the following best describes the relationship between Repo Rate and Reverse Repo Rate as monetary policy tools used by the RBI?

Accepted Answer

The Repo Rate is the rate at which RBI lends to commercial banks, while the Reverse Repo Rate is the rate at which RBI borrows from banks. The Reverse Repo Rate is typically lower than the Repo Rate, and both form a corridor within which market rates operate.

Question 15

The Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) scheme was launched in which year, and what is the annual cash transfer amount per eligible farmer?

Accepted Answer

PM-KISAN was launched on 24 February 2019 by the Ministry of Agriculture & Farmers Welfare. It provides direct income support of ₹6,000 per year (in three equal installments of ₹2,000 each) to eligible small and marginal farmers.

SSC MTS Budget, Fiscal & Monetary Policy

Budget, Fiscal & Monetary Policy— Rules & Concept

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Budget, Fiscal & Monetary Policy — Practice Questions

60-Second Revision — Budget, Fiscal & Monetary Policy