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      Question

      The "International Department" of the Reserve Bank of

      India (which encompasses international monetary relations and external debt monitoring) functions primarily as:
      A The primary negotiator for India's bilateral trade agreements and tariffs. Correct Answer Incorrect Answer
      B The nodal agency for managing and monitoring India’s external debt and coordinating with international financial institutions like the IMF. Correct Answer Incorrect Answer
      C The sole authority for approving Foreign Direct Investment (FDI) in the manufacturing sector. Correct Answer Incorrect Answer
      D The regulator for domestic cooperative banks and regional rural banks. Correct Answer Incorrect Answer

      Solution

      The RBI's International Department (often working in conjunction with the Internal Debt Management Department and the Ministry of Finance) plays a critical role in India's global financial positioning. 1. Coordination with International Bodies: The RBI acts as the representative and "Alternate Governor" to the International Monetary Fund (IMF) . It handles the operational aspects of India's membership, including Special Drawing Rights (SDRs) and participation in IMF's data dissemination standards (like the SDDS). 2. External Debt Management: While the Ministry of Finance manages sovereign external debt, the RBI is responsible for monitoring and compiling data on total external debt , which includes:

      • Commercial borrowings (ECBs).
      • Non-resident deposits (NRI deposits).
      • Short-term trade credits.
      • Coordination of the External Debt Management Unit (EDMU) .
      3. Policy and Surveillance: The department monitors international macroeconomic developments, exchange rate regimes, and global financial stability risks to advise the Government of India on external sector policies. Why other options are incorrect:
      • Option A: Bilateral trade agreements and tariffs are handled by the Ministry of Commerce and Industry , not the RBI.
      • Option C: FDI policy is formulated by the Department for Promotion of Industry and Internal Trade (DPIIT) under the Ministry of Commerce.
      • Option D: The supervision of cooperative and rural banks falls under the Department of Supervision and NABARD , respectively.

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