Page 41 - DMGT303_BANKING_AND_INSURANCE

Banking and Insurance

Notes Time Liabilities: The liabilities, which the commercial banks are liable to pay to the customers
on there anytime demand. The liabilities that the banks are liable to pay within one month's
time, due to completion of maturity period, are also considered as time liabilities.
Ways and Means Advances: These are temporary advances (overdrafts) extended by the RBI to
the government. Section 17(5) of the RBI Act allows the RBI to make WMA both to the Central
and state government. Objective is to bridge the interval between expenditure and receipts.
They are not a source of finance but are meant to provide support, for purely temporary difficulties
that arise on account of mismatch/shortfall in revenue or other receipts for meeting the govt.
liabilities. They have to be periodically adjusted to enable use of such financing for future
mismatches.

2.8 Review Questions

1. Discuss the monetary and non-monetary functions of the Reserve Bank of India.
2. What are the main functions of a central bank? Discuss the economic significance of a
central bank serving as a banker’s bank.
3. What are the main characteristics of a central bank? How does the central banking differ
from commercial banking?
4. “A well-organized central bank controls the internal price level, stabilizes the foreign
exchange rate and prevents the occurrence of financial and industrial crises.” Discuss.
How does a central bank do this?

5. Discuss the significance of central bank in the economic development of a country.
6. Describe the constitution and organisational structure of the Reserve Bank of India.

7. How does the Reserve Bank of India regulate currency and credit in India?
8. Explain the working of selective credit control in India.

9. Critically examine the monetary policy of the Reserve Bank of India.
10. What has the Reserve Bank of India done to develop and regulate banking in the country?

Answers: Self Assessment

1. Independence 2. Department of banking supervision
3. RBI 4. GOI

5. Central bank 6. True
7. True 8. True

9. False 10. True
11. Rate of exchange 12. Central banks

13. RBI (Reserve Bank of India) 14. Proportion
15. Advances

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