In a reverse repo operation, what does the RBI do?
Correct answer C. Borrows funds from banks against government securities
Topic / 50 questions
RBI and Monetary Policy MCQs
RBI and Monetary Policy MCQs are multiple-choice questions on the history and functions of the Reserve Bank of India, the Monetary Policy Committee and the tools used to manage money supply and liquidity. They suit RBI, IBPS and SBI exam preparation, and every question on MCQs360 shows its correct answer instantly.
Under the RBI Act, the Central Board may include up to how many Deputy Governors?
Correct answer C. Four
Which law empowers RBI to regulate and supervise payment systems in India?
Correct answer D. Payment and Settlement Systems Act, 2007
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At a minimum, how many times a year must the Monetary Policy Committee meet?
Correct answer B. Four
External members of the Monetary Policy Committee are appointed for a term of how many years?
Correct answer B. Four years
Under the flexible inflation targeting framework adopted in 2016, what CPI inflation target was set?
Correct answer A. 4 per cent with a band of plus or minus 2 per cent
Which price index is used for India’s inflation target under the flexible inflation targeting framework?
Correct answer D. Consumer Price Index (Combined)
Who sets India’s inflation target under Section 45ZA of the RBI Act?
Correct answer C. The Central Government in consultation with RBI
RBI is deemed to have failed its inflation target if average inflation stays outside the tolerance band for how long?
Correct answer B. Three consecutive quarters
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Which RBI committee, reporting in 2014, recommended adopting CPI-based flexible inflation targeting?
Correct answer D. Urjit Patel Committee
Since 1957, RBI’s note issue has been backed under which system?
Correct answer C. Minimum Reserve System
Under the Minimum Reserve System, the minimum value of gold RBI must hold is how much?
Correct answer A. Rs 115 crore
Which authority issues the one-rupee note in India?
Correct answer C. The Government of India
Where are India’s four government mints located?
Correct answer A. Mumbai, Kolkata, Hyderabad and Noida
Bharatiya Reserve Bank Note Mudran Private Limited, a wholly owned RBI subsidiary, runs note presses at which locations?
Correct answer D. Mysuru and Salboni
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Who designed the Indian rupee symbol adopted in 2010?
Correct answer A. D. Udaya Kumar
RBI began pilots of the retail digital rupee (e-Rupee) in which month?
Correct answer D. December 2022
The Market Stabilisation Scheme, used to absorb liquidity from large capital inflows, was introduced in which year?
Correct answer D. 2004
What are Ways and Means Advances provided by the RBI?
Correct answer D. Temporary loans to governments to bridge receipt and payment mismatches
Domestic scheduled commercial banks must direct what share of adjusted net bank credit to the priority sector?
Correct answer C. 40 per cent
About RBI and Monetary Policy MCQs
The first part of this topic covers the Reserve Bank's history and legal basis: its establishment under the RBI Act 1934, the start of operations in 1935, nationalisation in 1949, its early Governors, the minimum reserve system for currency issue and its role in foreign exchange under FEMA. Questions also ask about the Hilton Young Commission, whose recommendations led to the founding of the RBI.
The second part covers monetary policy. Questions explain quantitative tools such as the Cash Reserve Ratio, Statutory Liquidity Ratio, repo and reverse repo, the Liquidity Adjustment Facility and the Market Stabilisation Scheme, as well as the Monetary Policy Committee, the flexible inflation targeting framework adopted in 2016 and priority sector lending rules. Policy rates change often, so learn how each tool works.
Key facts to remember
- The Reserve Bank of India began operations on 1 April 1935 and was nationalised with effect from 1 January 1949.
- C. D. Deshmukh was the first Indian Governor of the Reserve Bank of India.
- The Monetary Policy Committee has six members: three from the RBI, including the Governor, and three external members appointed by the Central Government for four years.
- The Statutory Liquidity Ratio is prescribed under the Banking Regulation Act 1949, while the Cash Reserve Ratio is maintained under the RBI Act 1934.
- In a reverse repo operation the RBI borrows from banks, absorbing liquidity from the system.
- The Foreign Exchange Management Act 1999 replaced the Foreign Exchange Regulation Act.
Exams that include RBI and Monetary Policy MCQs
India
- RBI Grade B
- RBI Assistant
- IBPS PO
- IBPS Clerk
- SBI PO
- RRB PO
- UPSC CSE Prelims
How to prepare for RBI and Monetary Policy MCQs
- For each monetary tool, note whether raising it injects or absorbs liquidity, since many questions test the direction of the effect.
- Learn which Act and section underpins each requirement, such as the RBI Act for CRR and the Banking Regulation Act for SLR.
- Build a short timeline of RBI milestones: 1934 Act, 1935 start, 1937 move to Bombay, 1949 nationalisation and 2016 MPC.
- Do not rely on memorised rates; confirm the latest repo, CRR and SLR figures from the most recent RBI policy statement before your exam.
Frequently asked questions
What is the difference between repo and reverse repo?
Under a repo the RBI lends money to banks against government securities, injecting liquidity. Under a reverse repo the RBI borrows money from banks against securities, absorbing liquidity. Raising either rate generally tightens monetary conditions.
What is the Monetary Policy Committee?
The Monetary Policy Committee is a six-member body set up under an amendment to the RBI Act in 2016 to fix the policy repo rate. It includes the RBI Governor as chair, two other RBI officials and three external members, and the Governor has a casting vote in a tie.
Which exams ask RBI and Monetary Policy MCQs?
These questions are common in RBI Grade B and RBI Assistant exams and in the banking awareness sections of IBPS PO, IBPS Clerk, SBI PO and RRB bank exams. Concept questions on monetary policy also appear in the UPSC Civil Services prelims.
Last reviewed October 2026