Which of the following statements is/are correct?
Statement I: A bank's main liability is the deposits it holds.
Statement II: Open Market Operations involve buying and selling government bonds.
Statement III: The Bank Rate is the rate at which RBI lends to commercial banks.
Show answer & explanation
Correct answer: B
Explanation
Answer: I, II and III all three statements are correct
Explanation: All three statements correctly describe basic banking and monetary policy concepts.
Statement I is correct because deposits collected from customers form the primary liability of a bank.
Statement II is correct because Open Market Operations (OMO) involve the buying and selling of government securities to regulate money supply.
Statement III is correct because the Bank Rate is the rate at which the Reserve Bank of India lends money to commercial banks without collateral.
Additional Key Facts
Bank liabilities include deposits and borrowings.
OMO is a key monetary policy tool used to control inflation and liquidity.
Bank Rate is usually higher than the repo rate.
RBI uses multiple tools like CRR, SLR, repo rate, and OMO.
Monetary policy in India is managed by the Monetary Policy Committee (MPC).
Potential Exam-Oriented Questions & Answers
Question: What are bank deposits classified as?
Answer: Bank liabilities
Question: Which committee is responsible for monetary policy decisions in India?
Answer: Monetary Policy Committee (MPC)